[1. Call General Session to Order]
[00:00:07]
OKAY, WE'VE GOT THE COMMITTEE HERE, SO LET'S GO AHEAD AND GET STARTED.
UM, GOOD MORNING, MEMBERS OF THE FINANCE AND AUDIT COMMITTEE MEETING, UH, AND GUEST.
I'M BILL FLORES, CHAIR OF THE ERCOT, UH, BOARD OF DIRECTORS.
I HEREBY CALL THIS MEETING TO ORDER OF THE FINANCE AND AUDIT COMMITTEE.
UH, WELCOME TO THE APRIL 7TH, 2025 FINANCE AND AUDIT COMMITTEE MEETING.
DURING THE FEBRUARY 25TH, 2025, SPECIAL MEETING OF THE BOARD, I ANNOUNCED THAT, UH, BOARD MEMBER CARLOS AGUILAR WOULD SERVE AS CHAIR OF THE F AND A COMMITTEE.
HOWEVER, CARLOS SUBSEQUENTLY RESIGNED FROM THE BOARD LAST WEEK TO PURSUE A DIFFERENT OPPORTUNITY AND UNTIL THE APPOINTMENT OF A NEW CHAIR OF THE FINANCE AND AUDIT COMMITTEE MEETING, I WILL MANAGE THIS MEETING IN MY CAPACITY AS BOARD CHAIR.
IT'S IMPORTANT TO NOTE, HOWEVER, I AM NOT A MEMBER OF THIS COMMITTEE, AND SO I WILL NOT BE VOTING ON ANY VOTING ITEMS. UH, IT'S IMPORTANT TO REMEMBER THAT THIS MEETING IS BEING WEBCAST APPLIED TO THE PUBLIC ON ERCOT WEBSITE.
I'VE CONFIRMED THAT A QUORUM OF COMMITTEE MEMBERS IS PRESENT IN PERSON AND LOOKS LIKE YOU HAVE THREE OF YOUR MEMBERS.
UH, SO, UH, I'LL ASK PUC CHAIR THOMAS GSON IF HE WOULD LIKE TO CALL AN OPEN MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS ORDER.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS, IT'S CALLED TO ORDER TO CONSIDER MATTERS THAT HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR APRIL 7TH, 2025.
BEFORE MOVING ON TO TODAY'S BUSINESS, I'LL HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION, AS WELL AS THE SECURITY MAP, ARE INCLUDED WITH THE POSTED MEETING MATERIALS.
THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO, NOTICE OF PUBLIC COMMENT, AND IF ANY, UH, TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON MARCH THE 31ST, 2025, AND PROVIDE INSTRUCTIONS FOR THE PUBLIC, FOR THE PUBLIC COMMENTING IN PERSON TO DATE.
NO ONE IS EXPRESSED INTEREST IN COMMENTING.
IS THAT STILL CORRECT, CHAD? THAT IS CORRECT.
[3. February 3, 2025 General Session Meeting Minutes]
NOW MOVE ON TO AGENDA ITEM THREE, THE FEBRUARY 3RD, 2025, GENERAL SESSION MEETING MINUTES, THERE'S A DRAFTED AND MEETING MATERIALS.DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? SO MOVED.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THE MEETING MINUTES ARE UNANIMOUSLY APPROVED.
[4. Periodic Meeting with Independent Financial Auditor]
ON TO AGENDA ITEM FOUR, PERIODIC MEETING WITH INDEPENDENT FINANCIAL AUDITOR.WE HAVE THREE SUB ITEMS. UH, FIRST AGENDA, ITEM 4.1 IS A REVIEW OF THE REQUIREMENTS FOR THE ANNUAL AUDIT OF FINANCIAL STATEMENTS AND ANNUAL SERVICER CERTIFICATE.
UH, AND THEN WE'LL HAVE 4.2 AND 4.3 IN A MINUTE.
SO I'M GONNA TURN THE FLOOR OVER TO RICHARD SHIELD, THE ORGANIZATION'S CHIEF FINANCIAL OFFICER.
I'LL WALK YOU THROUGH THE PERIODIC MEETING REQUIREMENTS.
UH, FIRST IS 4.1, REVIEWING THE REQUIREMENTS FOR THE ANNUAL AUDIT OF THE FINANCIAL STATEMENTS AND ANNUAL SERVICER CERTIFICATE.
THE FNA COMMITTEE CHARTER REQUIRES A COMMITTEE TO PROVIDE A RECOMMENDATION TO THE BOARD OF DIRECTORS, WHETHER THE COMPANY'S ANNUAL FINANCIAL STATEMENTS AUDIT SHOULD BE ACCEPTED.
SO WE'LL BE, UH, RECOMMENDING THE BOARD ACCEPT THE ERCOT AUDITED FINANCIAL STATEMENTS, THE TEXAS ELECTRIC MARKET STABILIZATION FUNDING, M FINANCIAL STATEMENTS, AND THE TEXAS ELECTRIC MARKET STABILIZATION FUNDING IN, AS WELL AS A REVIEW OF THE ANNUAL SERVICE CERTIFICATE, WHICH DOES NOT REQUIRE A VOTE OR BOARD ACTION.
AND IN GENERAL, SESSION ITEM NINE, FOLLOWING THE EXECUTIVE, THE EXECUTIVE SESSION WILL TAKE A VOTE ON THOSE ITEMS. WE HAVE THE, UH, REQUIREMENTS FROM THE BYLAWS, PROTOCOLS, AND OUR CHARTER REQUIREMENT, UH, PRESENTED HERE.
AND THEN THE REVIEW REQUIREMENTS, UM, UH, ALL AUDITED ANNUALLY BY AN INDEPENDENT ACCOUNTING FIRM FOR, UH, TIM'S FE SFE.
AND THEN THE SERVICING AGREEMENT, UH, REQUIRES THAT WE CAUSE A FIRM OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO ANNUALLY PREPARE BEFORE MARCH 31ST A REPORT REGARDING THE SERVICERS ASSESSMENT OF COMPLIANCE WITH THE SERVICING CRITERIA SET FORTH IN THE UPLIFT PROPERTY SERVICING AGREEMENT.
AND THAT APPLIES TO ERCOT, THAT'S ERCOT RESPONSIBILITIES THAT HAVE BEEN AUDITED IN REGARD TO OUR, UH, UPLIFT PROPERTY SERVICING AGREEMENT REQUIREMENTS.
THE REQUEST FOR THE VOTE WILL FOLLOW ALL OF THE PRESENTATIONS.
ANY QUESTIONS ON THE REQUIREMENTS? OKAY.
WELL, THAT WILL TAKE US INTO, IS IT ALL RIGHT IF I SKIP THROUGH OR WOULD YOU LIKE TO, I I'LL GO AHEAD AND, AND, UH, LET ME MAKE A, A, UH, SITUATIONAL AWARENESS ANNOUNCEMENT FOR THE, FOR COMMITTEE MEMBERS.
WE WILL, UH, TAKE A SHORT BREAK TO GRAB LUNCH, UH, BEFORE WE GO INTO THE BUDGET SESSION OF THIS MEETING, UH, SO THAT YOU CAN PLAN ACCORDINGLY, UH, AS YOU GO THROUGH THE AGENDA.
[00:05:01]
THAT, WE'LL GO TO AGENDA ITEM 4.2, THE REPORT ON THE DECEMBER 31ST, 2024 FINANCIAL AUDIT, ANNUAL SERVICER CERTIFICATE.BAKER TILLY WILL PRESENT THREE REPORTS, WHICH I UNDERSTAND ARE ANTICIPATED TO BE UNMODIFIED REPORTS OR OTHERWISE KNOWN AS CLEAN OPINIONS ON THE FINANCIAL STATEMENTS FOR ERCOT FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING.
UH, THREE VOTING ITEMS ON ACCEPTANCE OF THE REPORTS WILL BE TAKEN UP WHEN WE RETURN TO GENERAL SESSION, UH, LATER ON TODAY'S AGENDA.
IF YOU'LL BE WITH US JUST A MOMENT.
IT TURNS OUT THE ACCOUNTANTS DID NOT, UH, ENTER THE ROOM WHILE WAITING FOR THE AUDITOR TO JOIN US UP TO JOINING US.
NOW, I'LL INTRODUCE, UM, AARON WMAN, UH, WHO IS OUR PRINCIPAL, AND SARAH SLAUGHTER, WHO IS THE DIRECTOR ON OUR AUDIT.
I JUST WANTED TO EXTEND MY THANKS TO BAKER TILLY FOR ALL OF THE WORK, UH, THEY DID ON THIS AUDIT AND THE PROFESSIONALISM WITH WHICH IT WAS, UM, PERFORMED AND UNDERTAKEN.
AND I WILL TURN OVER THE FLOOR TO ERIN AND SARAH.
SARAH, WE LOOK FORWARD TO RECEIVING YOUR REPORT.
UH, AND ONCE AGAIN, I'M AARON WMAN AND SARAH SLAUGHTER, AND PLEASED TO PRESENT THE FISCAL YEAR 2024 FINANCIAL AUDIT ON PAGE, ON PAGE DOWN.
WELL, WHAT I WANT TO DO FIRST IS JUST GO THROUGH THE STATUS OF THE AUDIT ENGAGEMENTS, THEN GO THROUGH AN AUDIT OVERVIEW.
YOU KNOW, WHAT IS IT THAT WE DO AS PART OF THE AUDIT PROCESS? GO THROUGH A LITTLE BIT, TALK ABOUT INTERNAL CONTROLS AND OUR INTERNAL CONTROL COMMUNICATION.
UH, TOUCH ON THE SERVICES AGREEMENT, EXAMINATION ENGAGEMENT THAT WE COMPLETED.
AND THEN LASTLY, GO THROUGH OUR AUDITOR'S COMMUNICATION TO YOU CHARGED WITH GOVERNANCE.
UH, SO TO, TO START OFF, UH, WE'RE SUBSTANTIALLY COMPLETE WITH OUR AUDIT AT THIS POINT.
UH, WE DO HAVE A COUPLE WRAP UP ITEMS, BUT WE ANTICIPATE ISSUING FINAL REPORTS IN TWO DAYS.
UH, BUT JUST TO NOTE, THE ITEMS THAT WE'RE PROVIDING AUDIT OPINION ON IS A CONSOLIDATED FINANCIAL STATEMENTS FOR ERCOT, THE TEXAS ELECTRIC MARKET STABILIZATION FUNDING M AND THEN ALSO N.
AND AGAIN, WE ARE ISSUING UNMODIFIED OPINIONS ON THOSE AUDIT ENGAGEMENTS.
THAT'S, UH, ALSO KNOWN AS A CLEAN OPINION, WHICH IS THE HIGHEST LEVEL OF ASSURANCE THAT WE CAN PROVIDE IS YOUR AUDIT FIRM.
IF WE TAKE A LOOK AT THIS YEAR'S AUDIT, OUR FIRM SPENT APPROXIMATELY 800 HOURS CONDUCTING THAT AUDIT.
AND EACH YEAR, IF YOU WERE AT SOME OF THESE PRESENTATIONS IN YEARS PAST, UH, WE WOULD DISCUSS ANY POTENTIAL ACCOUNTING PRINCIPLE CHANGES THAT AFFECTED THE YEAR.
UH, THIS WAS A VERY STRAIGHTFORWARD AUDIT YEAR IN THAT THERE WERE NO MAJOR ACCOUNTING PRINCIPLE CHANGES.
SO AGAIN, VERY STRAIGHTFORWARD AUDIT.
SO OUR AUDITS WERE PERFORMED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS.
THOSE ARE THE STANDARDS WE'RE REQUIRED TO FOLLOW AS YOUR AUDIT FIRM.
UH, BUT IF WE TAKE A STEP BACK AND LOOK AT THE AUDIT PROCESS, I'D SAY ROUGHLY 30% OF WHAT WE DO IS SPECIFIC TO INTERNAL CONTROLS.
SO WHEN WE COME IN, ONE OF THE FIRST THINGS WE DO IS WE DOCUMENT YOUR MAJOR PROCESSES.
WE THEN DETERMINE WHAT MAJOR CONTROLS ARE IN PLACE IN THOSE PROCESSES, AND THEN WE TEST THOSE FOR AN EFFECTIVENESS.
UH, BUT THAT'S ABOUT 30% OF WHAT WE DO.
AND I'D SAY MOST OF WHAT WE DO THERE IS IN YOUR INFORMATION TECHNOLOGY AREA, 40% OF WHAT WE DO THEN IS WHAT WE CALL OUR SUBSTANTIVE TESTING.
THAT'S THE NUTS AND BOLTS OF OUR AUDIT.
THAT WOULD BE, UH, TAKING A LOOK AT YOUR, UH, FIXED ASSET ADDITIONS.
IT WOULD BE LOOKING AT SOURCE DOCUMENTATION, YOUR INVOICES, CONFIRMING YOUR CASH AND INVESTMENT BALANCES WITH OUTSIDE PARTIES.
AND THEN THE REMAINING 30% HAS TO DO WITH THE PLANNING OF YOUR AUDIT ENGAGEMENT AND THEN FINANCIAL REPORTING.
BUT WHAT I'VE DONE HERE IS I'VE LAID OUT SOME OF THE MAJOR AREAS OF EMPHASIS OR MAJOR AREAS OF TESTING, UH, AS WE GO ABOUT AND CONDUCT THE AUDIT.
AND I THINK IF YOU LOOK AT YOUR FINANCIAL STATEMENTS, NONE OF THESE SHOULD COME AS ANY SURPRISE.
YOU KNOW, OBVIOUSLY, WE SPEND A SIGNIFICANT AMOUNT OF TIME LOOKING AT YOUR CASH AND INVESTMENTS, YOUR PAYROLL PROCESS, ACCOUNTS RECEIVABLE, UH, YOUR DEFAULT CHARGES RECEIVABLE, REVENUE RECOGNITION NOTES, AND BONDS PAYABLE, PROPERTY EQUIPMENT AND SYSTEMS UNDER DEVELOPMENT.
AND THEN AGAIN, EVALUATION OF CONTROLS OVER CASH, DISBURSEMENTS, PAYROLL SETTLEMENTS, AND INFORMATION TECHNOLOGY.
BUT AGAIN, JUST SOME OF THE MAJOR AREAS OF EMPHASIS BASED ON OUR TESTING.
SO OUR AUDIT OBJECTIVE IS TO OBTAIN REASONABLE ASSURANCE THAT YOUR FINANCIAL STATEMENTS ARE FREE
[00:10:01]
FROM MATERIAL MISSTATEMENT.NOW, I HAD JUST MENTIONED THAT WE PROVIDE AN OPINION ON YOUR FINANCIAL STATEMENTS.
I TALKED A LITTLE BIT ABOUT INTERNAL CONTROLS, BUT I DID WANNA POINT OUT, EVEN THOUGH WE TAKE A LOOK AT CONTROLS, WE WILL TEST CONTROLS.
WE DO NOT PROVIDE AN OPINION ON INTERNAL CONTROLS.
HOWEVER, UH, IF WE FIND OR HAVE CONTROL DEFICIENCIES OR INTERNAL CONTROL BREAKDOWNS, THE PROFESSION REQUIRES US TO CATEGORIZE THOSE IN AREA OF SEVERITY.
UH, THE MOST SEVERE WOULD BE WHAT WE CALL MATERIAL WEAKNESS.
AND THAT'S ANY BREAKDOWN OR LACK OF CONTROL THAT WOULD LEAD TO MORE THAN A REASONABLE POSSIBILITY THAT YOUR FINANCIAL STATEMENTS, UH, COULD BE MATERIALLY MISSTATED.
AND PLEASE REPORT WE DID NOT IDENTIFY ANY MATERIAL WEAKNESSES.
UH, THE NEXT, UH, THE NEXT CATEGORY DOWN LESS SEVERE THAN A MATERIAL WEAKNESS IS WHAT WE CALL A SIGNIFICANT DEFICIENCY.
AND, UH, THAT DEFINITION IS IT'S ANYTHING LARGE ENOUGH THAT WOULD WARRANT THE ATTENTION OF GOVERNANCE, AND WE DID NOT IDENTIFY ANY SIGNIFICANT DEFICIENCIES.
NOW, I WILL SAY, AS PART OF ANY AUDIT ENGAGEMENT, WE WILL OFTEN HAVE INDUSTRY BEST PRACTICE RECOMMENDATIONS, UH, POTENTIAL FINANCIAL STATEMENT DISCLOSURE ENHANCEMENTS, UH, MINOR CONTROL DEFICIENCIES, POTENTIALLY WITH INFORMATION TECHNOLOGY.
UH, BUT AGAIN, NOTHING THAT, UH, WARRANTS THE LEVEL OF YOUR ATTENTION.
THE OTHER ITEM WE DO IS WE DO PROVIDE AN EXAMINATION OF YOUR, ON YOUR SERVICERS AGREEMENT.
UH, JUST KNOW THAT WE DID FILE, UH, AND COMPLETED THAT BEFORE THE DEADLINE, AND THAT HAS BEEN, UH, COMPLETED AND ISSUED IN FINAL FORM.
SO ONE OF THE ITEMS YOU WILL RECEIVE, UH, IN THE NEXT COUPLE OF DAYS IS OUR AUDITOR'S COMMUNICATION WITH U CHARGE, WITH GOVERNANCE.
UH, SO I JUST WANT TO TOUCH ON A COUPLE OF THESE ITEMS IN HERE.
UM, SO IF YOU HAVEN'T, UH, IF YOU TAKE A LOOK AT NOTE TWO IN YOUR FINANCIAL STATEMENTS, YOU'LL SEE YOUR SIGNIFICANT ACCOUNTING POLICIES.
AN EXAMPLE OF THIS WOULD BE YOUR CAPITALIZATION POLICY.
SO WHAT WE DO AS AUDITORS IS WE MAKE SURE THAT THOSE POLICIES COMPLY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, BUT NOT ONLY THAT THEY COMPLY, BUT THAT YOU'RE ACTUALLY FOLLOWING THOSE POLICIES.
SO AGAIN, UH, WHEN YOU GET A CHANCE, BE SURE TO TAKE A LOOK AT NOTE TWO.
NOW, OFTEN GET ASKED BY GOVERNING BODIES, WHEN YOU TAKE A LOOK AT THESE FINANCIAL STATEMENTS, WHAT COULD BE, I GUESS, WHAT COULD BE THE LIMITATIONS OF THESE STATEMENTS, OR IF THERE WAS A, WHAT COULD GO WRONG? UH, WHERE WOULD THAT BE OR WHAT WOULD THAT HAVE TO DEAL WITH? AND I WOULD SAY, UH, ALMOST ALWAYS IT WOULD HAVE TO DO WITH A SIGNIFICANT ESTIMATE.
SO MUCH SO, IN FACT, THAT WE'RE REQUIRED TO POINT OUT WHAT SIGNIFICANT ESTIMATES ARE WITHIN THESE FINANCIAL STATEMENTS.
AND YOU HAVE THREE, YOU HAVE YOUR ACCRUED COMPENSATED ABSENCES, I'M SORRY, TWO, AND THEN DEPRECIATION OF YOUR FIXED ASSETS.
IF WE ENCOUNTERED ANY SIGNIFICANT DIFFICULTIES, UH, PERFORMING THE AUDIT, WE'D BE REQUIRED TO DISCLOSE THOSE.
AND WE DID NOT IDENTIFY ANY OF THOSE.
UH, IN ADDITION, WE DID NOT IDENTIFY ANY FRAUD OR NON-COMPLIANCE WITH CONTRACTS, LAWS, REGULATIONS, AND WE DID NOT.
THIS YEAR, THERE WERE NO SIGNIFICANT OR UNUSUAL TRANSACTIONS.
IF WE HAD ANY ADJUSTING JOURNAL ENTRIES OR WAIVED ADJUSTING JOURNAL ENTRIES AS PART OF THE AUDIT PROCESS, WE'D BE REQUIRED TO COMMUNICATE THOSE.
AND WE DID NOT IDENTIFY ANY ADJUSTING JOURNAL ENTRIES OR ANY WAIVED ADJUSTING JOURNAL ENTRIES.
IF WE HAD ANY DISAGREEMENTS WITH MANAGEMENT, UH, AGAIN, WE'D BE REQUIRED TO DISCLOSE THOSE OR ANY OTHER SIGNIFICANT FINDINGS OR ISSUES.
UH, JUST KNOW IF AT ANY POINT IN TIME WE HAD ANY OF THESE, WHETHER IT BE FRAUD OR DISAGREEMENT WITH MANAGEMENT, UH, THIS WOULD NOT BE THE FIRST TIME YOU'D BE HEARING ABOUT IT.
I WOULD REACH OUT TO THE CHAIR TO HAVE THOSE DISCUSSIONS ON A TIMELY BASIS.
UH, THE LAST THING WE, WE KNOW YOU WOULD LIKE IS COMING INTO A PRESENTATION LIKE THIS AND HAVING A SURPRISE.
ONE OF THE ITEMS THAT WILL BE ATTACHED TO OUR LETTER, OUR AUDIT RESULTS LETTER, IS THE MANAGEMENT REPRESENTATIONS.
UH, THAT'S A LETTER FROM YOUR MANAGEMENT TEAM THAT DISCLOSES A NUMBER OF REPRESENTATIONS REGARDING THE AUDIT AND YOUR FINANCIAL STATEMENTS.
IT'LL POINT TO AND DISCUSS SOME OF THEIR THOUGHTS ON INTERNAL CONTROLS, FRAUD, FRAUD RISKS, SIGNIFICANT ACCOUNTING POLICIES, UH, OUR INDEPENDENCE, THINGS LIKE THAT.
SO IF YOU HAVEN'T BEFORE, I'D URGE YOU TO TAKE A LOOK AT THAT LETTER AND READ SOME OF THOSE DISCLOSURES AND REPRESENTATIONS THAT YOUR MANAGEMENT TEAM MAKES AS PART OF THE AUDIT PROCESS.
UH, GOING CONCERN, THAT'S ONE OF THE THINGS THAT, UH, WE NEED TO LOOK AT AS YOUR ACCOUNTING FIRM.
UH, IF YOU THINK BACK TO THE WINTER STORM URI, UH, THERE WAS DEFINITELY A LOT OF DISCUSSIONS RELATIVE TO GOING CONCERN.
UH, THE GOOD NEWS IS THIS YEAR, UH, THERE WE DO NOT HAVE A GOING CONCERN ISSUE, AND EVERYTHING LOOKS GOOD THERE.
IF YOUR MANAGEMENT TEAM HAD ANY CONSULTATIONS WITH OTHER AUDIT FIRMS ABOUT ACCOUNTING TRANSACTIONS AND THINGS LIKE THAT, WE'RE
[00:15:01]
REQUIRED TO BE NOTIFIED OF THAT.UH, PLEASE REPORT THAT WE ARE NOT AWARE OF ANY COMMUNICATIONS TAKING PLACE WITH OTHER ACCOUNTING FIRMS RELATIVE TO ACCOUNTING POLICIES OR ACCOUNTING MATTERS.
UH, AUDITOR INDEPENDENCE, I'D SAY EVERY YEAR THE PROFESSION CONTINUES TO TAKE A CLOSER AND CLOSER LOOK AT AUDIT AUDITOR INDEPENDENCE.
UH, PLEASE REPORT THAT OUR FIRM AND EVERY INDIVIDUAL ON YOUR AUDIT ENGAGEMENT IS INDEPENDENT WITH YOUR ENTITY, IN FACT AND APPEARANCE AND RELATED PARTIES.
UH, WE ARE NOT AWARE OF ANY MATERIAL TRANSACTIONS INVOLVING RELATED PARTIES.
SO LASTLY, WE JUST WANT TO THANK MANAGEMENT, UH, AND THEIR ENTIRE TEAM, UH, FOR ALL THEIR WORK DURING THE AUDIT.
UM, I THINK, YOU KNOW, GREAT JOB, UH, CLEAN AUDIT, A VERY EFFICIENT PROCESS FOR ALL OF US.
SO AGAIN, THANK YOU TO RICHARD, LESLIE, SEAN, SEAN, AND THEIR ENTIRE TEAM.
AGAIN, AS MUCH AS I'D LIKE TO SAY, YOU KNOW, THESE, THESE VERY STRAIGHTFORWARD NO FINDING AUDITS HAVE A LOT TO DO WITH YOUR AUDIT FIRM.
IT'S YOUR MANAGEMENT TEAM, AND WE THINK THEY'VE DONE A GREAT JOB AGAIN.
SO WITH THAT, UH, WE'LL OPEN UP TO ANY QUESTIONS ANYONE MIGHT HAVE.
UH, THANK YOU AARON AND SARAH.
UH, ANY QUESTIONS FOR THAT FIRM? WE'RE GLAD TO SEE NO CHANGES IN ACCOUNTING POLICY THIS YEAR.
UH, NO M NO NEW M NO NEW M, THAT'S ALL.
SO, UH, ANY QUESTIONS? ALRIGHT, WE WILL HAVE YOU ALL BACK IN HERE IN A WHILE WHEN WE GO INTO EXECUTIVE SESSION FOR A PRIVATE DISCUSSION.
ALRIGHT, WE'LL, UH, ASK RICHARD TO COME BACK FOR A AGENDA ITEM 4.3, A REVIEW OF THE FINANCIAL AUDITED FINANCIAL STATEMENTS AND THE ANNUAL SERVICER CERTIFICATE.
SO, OUR PURPOSE IS TO REVIEW THE ANNUAL, UH, AUDITED FINANCIAL STATEMENTS AND THE ANNUAL SERVICERS ASSESSMENT OF COMPLIANCE.
AS WE MENTIONED THE PREVIOUS PRESENTATIONS, WE HAVE UNMODIFIED OPINIONS, CLEAN OPINIONS FOR ALL THREE, AND WE'RE IN COMPLIANCE WITH OUR SERVICING, UH, CRITERIA.
I'LL JUST TOUCH ON SOME SELECT SOME SELECT PAGES.
IF Y'ALL HAVE QUESTIONS ON ANYTHING ELSE, PLEASE STOP ME AS I'M GOING THROUGH THE PRESENTATION.
OF COURSE, WE HAVE THE CLEAN OPINION, UH, FROM, UH, BAKER TILLY.
OUR EXPECTED DATE IS, UH, AS MENTIONED IS THE NINTH FOR ISSUING.
THEN I'LL RUN YOU THROUGH A FEW OF OUR, OUR PRIMARY ACCOUNTS.
SO WHEN WE'RE LOOKING AT, UH, CASH AND CASH EQUIVALENCE, THIS IS MAINLY DRIVEN BY, UH, FAVORABLE FINANCIAL, UH, PERFORMANCE AND INTEREST INCOME ON THE INCREASE BETWEEN 23 AND 24, RESTRICTED CASH AND CASH EQUIVALENTS AT ITEM TWO, THIS IS MAINLY DUE TO, UM, SECURITY DEPOSIT INCREASES AT YEAR END DUE TO PRICING VARIABILITY.
THREE, UH, BOTH SHORT-TERM INVESTMENTS AND LONG-TERM INVESTMENTS HAVE STABILIZED IN THE SECOND YEAR OF OUR, UH, REINVESTMENT OF THE PROCEEDS FROM, UM, CONGESTION REVENUE RIGHTS.
WE HAD A FEW YEARS WHERE THAT WAS NOT THE CASE.
PROPERTY PLANT AND EQUIPMENT, UH, INCREASED PRIMARILY DUE TO THE CAPITALIZATION OF SOME LARGE PROJECTS RELATED TO DC FIVE.
SOME STORAGE SYSTEM UNDER DEVELOPMENT, UH, FELL FOR THE SAME REASONS.
ON ITEM FIVE, ACCRUED LIABILITIES, THIS IS AN INCREASE, UH, MAINLY DUE TO ACCRUED COMPENSATION ITEMS. ITEM SEVEN, DEFERRED REVENUE MAINLY IS OUR INTERCONNECTION REVENUE.
UH, THIS IS ONGOING AREA WHERE WE CONTINUE TO SEE GREATER INTERCONNECTIONS OVER TIME AND IS REFLECTED HERE IN THIS DEFERRED REVENUE COLUMN.
THOSE ARE, ARE RECOGNIZED AS THE INTERCONNECTION WORK IS COMPLETED.
UH, THE LONGEST TERM OF THOSE EXTENDS OUT OVER TWO YEARS.
UM, LONG-TERM CRR LIABILITIES, ITEM EIGHT, THIS IS ANOTHER YEAR OF DECLINE WITH A PREFERENCE FOR THE SHORTER TERM DURATION ON THE CONGESTION REVENUE RIGHTS AUCTIONS SYSTEM ADMINISTRATION FEE.
THIS, UH, HIGHER THIS YEAR, PRIMARILY DUE TO THE INCREASE IN THE SYSTEM ADMINISTRATION FEE TO 61 CENTS.
AND THEN ALSO WE HAD HIGHER MEGAWATT HOUR USAGE AND THAT DROVE AN 11.5 MILLION OF THAT DIFFERENCE.
OTHER SERVICES REVENUE, AGAIN, PRIMARILY, UH, INTERCONNECTION, BUT ALSO WEATHERIZATION AND WAN ITEM 11, SALARIES AND BENEFITS JUST AS A YEAR, UH, EMPLOYEE GROWTH.
AND 12, OUR INVESTMENT RETURN IS STAYING FAIRLY STABLE YEAR OVER YEAR WITH SOME DECLINE.
WE HAD ORIGINALLY ANTICIPATED A GREATER DECLINE AS INTEREST RATES FELL, BUT INTEREST RATES HAVE STAYED HIGH ON OUR CONSOLIDATED STATEMENT OF CASH FLOWS.
[00:20:01]
UM, ITEM 13, YOU'LL SEE THE DIFFERENCE HERE.WE HAD THE, UH, 2.3 BILLION IN 2023.
THAT WAS WHEN WE REENTERED THE MARKET AND WE BOUGHT THE INITIAL PORTFOLIO.
NOW WE'VE STABILIZED AND WE EXPECT MORE LIKE THIS 2024 NUMBER, ASSUMING ALL THINGS EQUAL.
UH, 14 IS THE, UH, SUBCHAPTER M PAY DOWN, UH, FOR THE EARLY PAY DOWN THAT OCCURRED IN THE CASH BALANCE THAT WAS RELATED TO THEM.
ALL RIGHT, SKIP AHEAD A FEW PAGES.
THIS REFLECTS THE SECURITY DEPOSITS I MENTIONED EARLIER ON OUR, UM, UH, BALANCE SHEET.
SO YOU SEE IT WAS 1.5 MILLION IN 2023, AND THAT INCREASED 2.26 AT THE END OF 2024.
UH, LIQUIDITY, UH, CASH CASH EQUIVALENTS WE'RE STAYING VERY STABLE THERE.
ALRIGHT, ANY QUESTIONS ON THE ERCOT FINANCIAL STATEMENTS? THERE WAS NOTHING ELSE I HAD TO CALL OUT ON THOSE STATEMENTS.
ANY QUESTIONS? THANK YOU FOR HITTING THE HIGH SPOTS.
OF COURSE, I BEG YOUR PARDON? I SAID THANK YOU FOR HITTING THE HIGH SPOTS.
WE WILL POINT OUT ONE, OH, I MISSED ONE.
WE DO HAVE A SUBSEQUENT EVENT.
THERE WAS A MATERIAL RECOVERY OF DEFENSE COSTS RELATED TO WINTER STORM LEGISLATION, I MEAN LITIGATION.
AND THAT TAKES ME TO THE END OF THOSE.
AND WHEN WAS THAT? WHAT, WHAT WAS THE DATE THAT WAS RECOVERED? UM, IT WAS WITHIN MARCH OF 2025.
I'LL SKIP US AHEAD TO SUBCHAPTER M AGAIN.
CLEAN OPINION EXPECTED ISSUANCE DATE ON APRIL 9TH.
THE ITEM 18 IS RELATED TO THE, UM, RECOVERY IN THE EARLY PAY DOWN OF THE SUB CHAPTER M AND OF COURSE THE ACCRUED LIABILITIES RELATED TO THE INTEREST ON THAT.
AND THEN THE REPAYMENT OF THE DEBT PAYABLE ON ITEM 18, AGAIN RELATED TO THE EARLY PAY DOWN RESERVE.
SUPPLEMENTAL CAPITAL WILL INCREASE BY 1 MILLION PER YEAR.
SO THAT IS NOTE TWO, THAT ITEM 20, UM, AN ITEM THAT WE'LL DISCUSS LATER.
BUT WE ARE WORKING ON THE REFINANCING, UM, OF THE SUBCHAPTER IN BONDS.
WE EXPECT THAT TO PICK UP AND MOVE FORWARD LATER THIS YEAR.
ALRIGHT, SUB N AGAIN, CLEAN OPINION APRIL 9TH.
UH, NOTHING ELSE IN THE END STATEMENTS.
LEMME SKIP US AHEAD TO THE SERVICE SOURCE CERTIFICATES.
AND THIS ASSERT THE, UH, SERVICER CERTIFICATE, UH, AND THE ASSERTION THAT WE HAVE COMPLIED IN ALL MATERIAL RESPECTS WITH THE APPLICABLE CRITERIA, OTHERWISE, VERY SIMILAR TO LAST YEAR.
THAT TAKES ME THROUGH THE END OF MY PRESENTATION ON THIS.
ANY QUESTIONS? COMMENTS? THANK YOU.
ANY QUESTIONS ON, ON AMARIN OR ANY OF THE FINANCIAL STATEMENTS? THANK YOU.
THAT WAS, UH, SMOOTHEST REVIEW WE'VE HAD IN SEVERAL YEARS.
SO, AND OBVIOUSLY THE TRANSITION FROM, UH, SEAN, OUR PRIOR CFO TO YOU HAS BEEN, UH, FAIRLY SEAMLESS.
SO CONGRATS TO YOU AND THE TEAM ON, ON DOING THAT.
WE'LL NOW MOVE ON TO, UH, COMMITTEE BRIEFS.
RICHARD IS GONNA STAY AT THE PODIUM AND WALK US THROUGH A JE ITEM 5.1 THROUGH 5.3, UH,
[5.1 Review 2025 Financial Summary]
WHICH WILL BEGIN WITH THE 2025 FINANCIAL SUMMARY FOLLOWED BY THE PERIODIC REPORT ON DEBT ON INVESTMENTS, AND THEN A PERIODIC, UH, REPORT ON DEBT COMPLIANCE.[00:25:02]
THANK YOU.UH, WE'LL TAKE A BREAK RIGHT AFTER THESE THREE REPORTS, UH, TO GRAB LUNCH, AND THEN WE'LL HAVE A WORKING LUNCH THROUGH THE BUDGET SESSION.
SO THIS IS GONNA BE YOUR FIRST VIEW OF THE 2025 FORECAST.
SO YEAR TO DATE, REVENUES NET OF EXPENDITURES, 20.1 MILLION, FAVORABLE TO BUDGET, UH, DRIVEN BY INTEREST, INCOME BEING FAVORABLE BY 12.2 MILLION.
AND PROJECT EXPENDITURES FAVORABLE BY 1.4 MILLION YEAR END FORECASTED REVENUES.
NET OF EXPENDITURES ARE 76.4 MILLION, FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME, WHICH IS FAVORABLE, EXPECTED TO BE FAVORABLE BY 60.3 MILLION.
UM, AND LEGAL SERVICES, UH, DUE TO THE RECOVERY FAVORABLE BY 7 MILLION.
AND STAFFING MANAGEMENT CURRENTLY FORECAST TO BE FAVORABLE BY 3.3.
ERCOT HAD 158 MILLION OF OPERATING FUNDS AS OF FEBRUARY 28TH, 2025, COMPARED TO 71.6 MILLION IN 2024 FOR THE SAME MONTH.
OKAY, SO FOR OUR NET AVAILABLE YEAR END IS AGAIN THE 76.4 MILLION.
WE HAVE THE 64.5 FAVORABLE REVENUES, UH, PRIMARILY DRIVEN BY INTEREST INCOME.
UH, SOME ADDITIONAL AMOUNT FROM DEPARTMENT REVENUES, UH, WHICH ARE PRIMARILY DUE TO INTERCONNECTION.
REVENUES EXPECTED TO BE HIGHER FOR THE YEAR BY 2.9 MILLION, OFFSET BY LOWER THAN FORECAST WAN REVENUE AND OTHER MISCELLANEOUS REVENUE SYSTEM ADMINISTRATION FEE IS CURRENTLY EXCEEDING, UM, FORECAST AT 1.2 MILLION ON THE EXPENDITURE SIDE.
ON THE EXPENDITURE SIDE, WE ARE, UH, APPROXIMATELY FLAT FOR PROJECT EXPENDITURES.
THE TAYLOR OFFICE, UH, TRANSFORMATION THAT IS EXPECTED TO BE FLAT VERSUS BUDGETED AMOUNTS, WHICH WAS APPROVED IN THE, UH, MEETING IN 2024.
SO WE'VE UPDATED OUR BUDGET TO REFLECT THAT DIDN'T AFFECT TOTAL SPEND, IT WAS JUST A SHIFT IN CATEGORIES.
RESOURCE UH, MANAGEMENT IS FAVORABLE BY 2.9 MILLION.
THAT'S 3.3 MILLION IN STAFFING MANAGEMENT OFFSET BY, UH, 0.4 MILLION UNFAVORABLE PROJECT WORK.
SO ADDITIONAL PROJECT WORK BEING IT'S THE PROJECT WORK ITSELF IS FAVORABLE, BUT IT WAS MORE HOURS THAN EXPECTED.
WHEN WE LOOK AT OTHER EXPENDITURES, THAT'S PRIMARILY DRIVEN BY THE 7 MILLION LEGAL SERVICE RECOVERY, UH, FAVORABLE EXPECTED VARIANCE OF 1.3 MILLION FOR PROPERTY TAX AND EXTENSION OF THE NEGOTIATIONS THAT UNDERWENT IN 23 AND 24 COMMON INFRASTRUCTURE AT ABOUT 1.1 MILLION.
AND THEN, UH, WILL POINT OUT THAT WE DO HAVE ELECTRICITY AS ITS OWN LINE ITEM, UH, WHICH IS NOT NORMAL FOR ERCOT, BUT WE HAD A RENEGOTIATION OF NOT A RENEGOTIATION, OUR CONTRACT EXPIRED WITH OUR CURRENT ELECTRIC PROVIDER AND WE HAVE, WE BENEFITED FOR SEVERAL YEARS FROM LOWER THAN IN THAN MARKET RATES.
AND NOW WE HAVE, UH, ENCOUNTERED THE ACTUAL MARKET RATES OF ELECTRICITY.
SO WE'VE INCREASED OUR, UH, UNFAVORABLE VARIANCE FOR THAT.
ANY QUESTION ON THE WATERFALL CHARCOAL? OH, I DO WANNA POINT OUT WE HAVE LOCKED IN 64 MILLION.
WELL, NOTHING LIKE CONTRACT RENEGOTIATIONS.
WE DO HAVE 64 MILLION OF OUR TOTAL INTEREST, UM, TO DATE BOOKED.
SO THAT'S, THAT'S EARNED INTEREST.
WE'VE, UH, LOCKED IN AN AN ADDITIONAL AMOUNT.
UM, WE HAVE 16 MILLION LOCKED IN FOR 26, UH, AND FORWARDS.
AGAIN, WE ARE SLIGHTLY FAVORABLE TO BUDGET FOR TOTAL ENERGY USAGE AND SYSTEM ADMINISTRATION FEE REVENUE FOR THE STATEMENTS OF FINANCIAL POSITION.
NET ASSETS WITHOUT DONOR RESTRICTIONS, EXCUSE ME, INCREASED 95.5 MILLION YEAR OVER YEAR.
EVERYTHING ELSE IS IN LINE WITH EXPECTATIONS.
STATEMENTS OF ACT ACTIVITIES AND NET ASSETS ASSETS.
IT'S, WE'RE EXPECTING A 4 MILLION INCREASE IN OPERATING REVENUES.
WE HAVE A 4 MILLION INCREASE IN OPERATING REVENUES DRIVEN BY, UH, SYSTEM ADMINISTRATION FEE REVENUE, INCREASE IN OPERATING EXPENSES DRIVEN OF 6.2 MILLION, DRIVEN BY SALARIES AND RELATED BENEFITS.
DEPRECIATION EXPENSE INCREASE IN FACILITY.
FACILITY AND EQUIPMENT EXPENSE AND INCREASE IN HARDWARE AND SOFTWARE MAINTENANCE EXPENSES, OUTSIDE SERVICES AND OTHER EXPENSES EACH
[00:30:01]
FOR SMALL AMOUNTS.AND THEN WE HAVE 3.8 MILLION INCREASE IN OTHER INCOME, UH, DRIVEN BY A 2.5 MILLION DECREASE IN INTEREST INCOME OVER THE PRIOR PERIOD AND A 6.3 MILLION INCREASE IN TREASURY OBLIGATIONS.
AS A REMINDER, WE HOLD ALL OF OUR TREASURY, UM, INVESTMENTS TO MATURITY AND WE DON'T REALIZE OR RECOGNIZE THAT GAIN, UM, FROM A CASH PERSPECTIVE, CRR FUNDS CONTINUE TO REMAIN IN A STABLE RANGE OVER TIME.
UM, WE HAVE A NEW HIGH VALUE OF 2.18, UH, BILLION.
WE HAVE NO USE OF CRR FUNDS FOR ERCOT OPERATIONS.
TAKES ME TO THE END OF THAT PRESENTATION.
ANY QUESTIONS ON THE FINANCIAL SUMMARY? DON'T SEE ANY QUESTIONS.
[5.2 Periodic Report on Investments]
LET'S MOVE TO THE INVESTMENT REPORT.INVESTMENT REPORT WAS REVISED.
UH, THERE WERE TWO KEY TAKEAWAYS THAT REFERENCED DECEMBER RATHER THAN FEBRUARY.
UH, OTHERWISE NO OTHER CHANGES TO THE REPORT.
UH, ERCOT IS IN COMPLIANCE WITH ALL DEBT REQUIREMENTS, INCLUDING SECURITIZATION.
ANY QUESTIONS ON THIS PRESENTATION? ANY QUESTIONS ON THE INVESTMENT REPORT AND THE MATERIALS? OKAY, LET'S GO ON TO THE DEBT COMPLIANCE
[5.3 Periodic Report on Debt Compliance]
PERIODIC REPORT ON DEBT COMPLIANCE.JUST TO PROVIDE A PERIODIC UPDATE OF OUR COMPLIANCE AND SERVICING.
WE ARE CURRENTLY IN COMPLIANCE WITH ALL DEBT REQUIREMENTS, INCLUDING SECURITIZATION.
ANY QUESTIONS ON DEBT COMPLIANCE REPORTS? OKAY.
AGAIN, THANK YOU RICHARD FOR, UH, UH, THE WORK THAT YOU AND THE TEAM HAVE DONE TO PRESENT THIS, BUT TO MAINTAIN THE MATERIAL AND PRESENT THE MATERIAL.
AND, UM, WE'RE GOING TO MOVE INTO THE REALLY MEATY PART OF THIS MEETING NOW.
UH, AFTER A SHORT BREAK, UH, WE'RE GONNA RECESS.
I'M GONNA SAY FOR ABOUT 10 MINUTES TO, UH, UH, GO OUT, GRAB YOUR LUNCH.
WE'LL COME BACK AND HAVE A WORKING LUNCH.
AS, UH, RICHARD AND THE FINANCE TEAM, UH, PRESENT THE, UH, PROPOSED BUDGET FOR 26 27.
UH, GENERAL SESSION IS NOW RECESSED AND THE WEBCAST WILL BE SUSPENDED FOR A FEW MINUTES.
UH, CHAIRMAN GLEASON, THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL STAND IN RECESS.
UH, I'M BILL FLORES, BOARD CHAIR, AND THE GENERAL SESSION OF THIS, UH, FINANCE AND AUDIT COMMITTEE MEETING IS HEREBY RECONVENED CHAIRMAN GLEASON.
WOULD YOU LIKE TO RECONVENE THE PUC OPEN MEETING? YES, SIR.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL RECONVENE AT 12:17 PM OKAY.
[6. Review Proposed 2026 / 2027 Biennial Budget]
WE'RE GONNA START THIS SESSION WITH THE AGENDA ITEM SIX, A REVIEW OF THE PROPOSED 20 26 20 27 BIANNUAL BUDGET.THIS IS AN INITIAL REVIEW OF THE PROPOSAL AHEAD OF A COMMITTEE AND BOARD VOTE ANTICIPATED IN JUNE.
WE HAVE PRESENTERS, UH, CHIEF AND NATIONAL OFFICER RICHARD SHIELD, GENERAL COUNSEL AND CHIEF COMPLIANCE OFFICER, CHAD SEALEY, CHIEF DIGITAL OFFICER, JP AND CHIEF OPERATING OFFICER WOODY RICKSON.
UH, RICHARD, WILL YOU PLEASE OPEN THIS SESSION? THANK YOU.
SO, ITEM SIX, PROPOSED BUDGET.
JUST TO WALK THROUGH THE PURPOSE.
UH, IT'S THE DUTY OF THE BOARD OF DIRECTORS TO APPROVE OUR BUDGET.
THE F AND A CHARTER STATES THAT THE COMMITTEE SHALL RECOMMEND A BUDGET, THE BOARD, A PROPOSED BUDGET AND ASSOCIATED FINANCING PLAN.
AND TODAY IS OUR INITIAL DISCUSSION OF THE BUDGET PLAN.
NON-VOTING ITEM VOTE WILL OCCUR IN JUNE, AS YOU MENTIONED.
KEY TAKEAWAYS, UM, IN JUNE, WE'LL VOTE ON THE BUDGET REQUEST AND TOTAL AUTHORIZED SPEND FOR 26 AND 27.
OUR INITIAL RECOMMENDATION INCLUDES EXPENDITURE AND HEADCOUNT INCREASES TO ADDRESS KNOWN AND ESTIMATED REQUIREMENTS.
OUR EXPECTED TOTAL USES OF FUNDS AMOUNT TO 474 MILLION IN 2026 AND 556.9 MILLION IN 2027, RE UTILIZING A CONSERVATIVE ENERGY FORECAST OF 519 TERAWATT HOURS IN 2026 AND 584.5 TERAWATTS IN 2027.
WE'RE PROPOSING A REDUCTION IN THE SYSTEM ADMINISTRATION FEE RATE
[00:35:01]
FROM THE CURRENT 63 CENTS PER MEGAWATT HOUR TO 61 CENTS PER MEGAWATT HOUR FOR 26 AND 27.FORECAST INTEREST INCOME OF 55.8 MILLION IN 2026 AND PROJECTED 46 MILLION IN 2027.
THIS BUDGET DOES NOT ANTICIPATE THE USE OF CONGESTION REVENUE, RIGHT AUCTION RECEIPTS FOR FUNDING.
ALL RIGHT, SO JUST TO GIVE EVERYBODY A BACKGROUND, I'LL WALK US THROUGH THE APPROVAL TIMELINE AND OVERVIEW OF HOW OUR BUDGET PROCESS WORKS AT ERCOT.
AND THEN WE'LL WALK THROUGH THE BUDGET DRIVERS, THE SYSTEM ADMINISTRATION FEE RATE, OPTION SUMMARY, OUR MANAGEMENT RECOMMENDED OPTION, WHICH IS OPTION ONE AND DETAILS.
AND THEN OF COURSE, THE RISK TO MEETING THE RECOMMENDED BUDGET.
THE APPROVAL TIMELINE IS STANDARD.
THIS IS A STANDARD FORM TIMELINE.
WE PRESENT THIS AT EVERY BUDGET, UM, BUDGET CYCLE.
WE HAVE OUR FIRST PRESENT, OUR FIRST PRESENTATION OF THE BUDGET TODAY, WHICH IS IN APRIL OF 2025.
THE SECOND IN JUNE OF 2025, WE SUBMIT TO THE PDCT AFTER A 35 DAY WAITING PERIOD AFTER BOARD APPROVAL, WHICH PUTS US IN AUGUST OF 2025 BEFORE THE PDCT UH, RECEIVES THAT.
THEN THERE'S A PUBLIC UTILITY COMMISSION OF TEXAS PUBLIC HEARING IN SEPTEMBER OF 2025, FOLLOWED BY AN OCTOBER, 2025 OPEN MEETING VOTE, WHICH ALLOWS US TO GET THE SYSTEM ADMINISTRATION FEE RATE IN EFFECT, UH, JANUARY 1ST, 2026.
AND THERE IS A MINIMUM OF 45 DAY AFTER PEC APPROVAL FOR US TO PUT A NEW SYSTEM ADMINISTRATION FEE RATE, IN EFFECT OVERVIEW OF THE BUDGET PROCESS.
SO OUR BUDGET PROCESS U UTILIZES AS A BASIS AND A STARTING POINT, OUR STRATEGIC PLAN.
SO IT'S CENTERED AROUND OUR MISSION, OUR BID, AND OUR STRATEGIC OBJECTIVES THAT FEEDS OUR BUSINESS PLANS.
UM, WHERE WE OPERATIONALIZE OUR STRATEGIC PLAN, WE LOOK AT THE OBJECTIVES AND KEY RESULTS, AND THAT'S ALSO INFORMED, INFORMS THE PROJECT BUDGET AND THE DEPARTMENTAL BUDGET.
AND OUR PROCESS BEGINS IN EARNEST WITH THE DEPARTMENTAL BUDGETS.
SO OUR MANAGERS BEGAN SUBMITTING THEIR, THEIR ESTIMATED NEEDS FOR 2026 AND 2027 IN EARLY OCTOBER.
SO OCTOBER OF LAST YEAR, WE BEGAN THIS PROCESS.
IT PROCEEDED UP FROM SU SUPERVISORS, MANAGERS, ALL THE WAY THROUGH THE DIRECTORS.
UH, BY THE TIME WE HIT DECEMBER, THE EXECUTIVES ARE IN FULL REVIEW OF THE BUDGET AND ALL OF THE SUBMISSIONS.
SO WE'VE MADE CUTS ALONG THE WAY, AND THAT'S THE FIRST TIME THE EXECUTIVES ARE CRITICALLY PUSHING DOWN ON THEIR STAFF.
UM, THERE'S A LOT OF CONVERSATIONS ALONG THE WAY, AND THAT'S MAKE IT SOUND LIKE THAT'S THE FIRST TIME.
THERE'S PLENTY OF CONVERSATIONS AS WE'RE GOING THROUGH THE BUDGET DEVELOPMENT PROCESS.
AND THAT CULMINATES IN EXECUTIVE LEVEL REVIEW.
AND THEN AT THE EXECUTIVE LEVEL, WE PUSH EVEN HARDER ON OURSELVES AND ON OUR TEAMMATES.
WE LOOK AT, AT ADDITIONAL COSTS THAT CAN BE CUT, AND IF THE BUDGET THAT WE'VE BROUGHT REFLECTS NOT JUST CUTS THAT ARE NEEDED, BUT THE ORGANIZATIONAL OBJECTIVES THAT WE'RE TRYING TO ACHIEVE.
SO WE TRY TO BALANCE THE TWO ITEMS. ALL RIGHT, SO I'LL WALK US THROUGH OUR BUDGET DRIVERS.
UH, THIS IS, UM, A GRAPH AND WOODY'S TEAM HAS HELPED US PUT THIS TOGETHER FOR SEVERAL, SEVERAL BUDGETS NOW, WHICH WALKS THROUGH THE GROWTH IN OUR CHANGING RESOURCE MIX AND THE CHANGING REL REGULATORY ENVIRONMENT.
SO WE HAVE THE DIFFERENT ITEMS THAT ARE, ARE FEEDING INTO OUR PROCESS.
ALONG THE BOTTOM IS THE YEARS, AND IT HAS JUST EXPANDED.
AND WHEN WE LOOK AT THE DIVIDING LINE OF YURI, UM, TOP, TOP RIGHT AND HOW MUCH HAS CHANGED SINCE THEN.
AND WE'RE AWARE THROUGH BOTH THE COMMITTEE MEETINGS, UH, THROUGH BOARD MEETINGS, HOW, HOW MUCH OF AN IMPACT THESE ITEMS HAVE HAD ON ERCOT AND OUR STAFFING THIS YEAR.
IN PARTICULAR, LARGE DATA CENTERS ARE AN AREA THAT HAVE OUR ATTENTION AS WELL AS THE RESULTS OF THE HOUSE BILL 50 66, UH, LOAD FORECAST REQUIREMENTS AND THE RELIABILITY, STANDARD EXPENDITURES, BUDGET ASSUMPTIONS.
SO, UH, LABOR IS DEFINED, UH, KNOWN AND ESTIMATED FUTURE WORK.
UH, FILLED POSITIONS THAT WE HAVE ARE USING CURRENT SALARIES THAT WE PROJECT FORWARDS AND GROW THEM BY THE ANNUAL GROWTH RATE.
UH, NEW VACANT POSITIONS ARE USING THE GRADE MID POINTS.
THIS IS OF COURSE, ZERO BASED BUDGET.
WE START WITH ZERO AND WE BUILD THE ENTIRE BUDGET FROM THE GROUND UP, UH, PROJECTIONS BEYOND THE 26 27 YEAR USE.
THE ERCOT COMPOUND ANNUAL GROWTH RATE, UH, PROJECT EXPENDITURES.
WE HAVE A SIGNIFICANT PROJECT, UM, GOVERNANCE PROCESS, AND WE DEVELOP ROADMAPS.
IT INCLUDES ESTIMATES FOR MARKET DESIGN, EE EFFORTS, WHICH, UH, ARE WRAPPING UP IN 2025 AND 2026.
[00:40:01]
WE HAVE THE DC SIX, UH, REFRESH, WHICH IS GONNA BEGIN IN 26, AND THEN VERY MUCH IN EARNEST IN 2027.UH, THAT WAS DISCUSSED IN TNS, UH, TO SOME EXTENT EARLIER.
BUT I DO WANNA MENTION THAT WE HAVE WITH RTC AND WITH THE WAY, UH, WE HAVE HAD TO PUT OFF SOME OF THE REVISION REQUESTS.
WE HAVE A SIGNIFICANT PORTFOLIO OF REVISION REQUESTS THAT ARE WAITING FOR US AT THE END OF RTC PLUS B.
SO THAT'S, THAT'S AN ADDITIONAL, UH, COST ELEMENT, UH, THAT'S BEING CONSIDERED AS PART OF THIS BUDGET AND AS PART OF OUR PROJECT PLANNING, IDENTIFY DEPARTMENT AND PROJECT EXPENDITURES.
AND OUR KPI, OF COURSE, IS TO BE PLUS OR MINUS 3% OF OUR BUDGET.
ALL RIGHT, TAKING US INTO THE NUMBERS, THIS IS OUR EXPENDITURES, STARTING WITH THE 2025 APPROVED BUDGET OF 363.5 MILLION, AND THEN INCREASING BY EACH BUCKET OF STRATEGIC OBJECTIVES WITH OTHER REFLECTING MANDATORY EXPENDITURES, UH, INTERCONNECTION, FOR INSTANCE, ADDITIONAL WEATHERIZATION EXPENSES, UH, ITEMS THAT ARE FUNDAMENTAL TO OUR COTS OPERATION THAT DON'T PERFECTLY ALIGN WITH THE STRATEGIC OBJECTIVE, STRATEGIC OBJECTIVES, UH, JUST FOR THE AUDIENCE AS AN INDUSTRY LEADER FOR GREATER RELIABILITY AND RESILIENCE.
UH, THE SECOND IS ENHANCING OUR ECONOMIC COMPETITIVE COMPETITIVENESS WITH RESPECTS TO TRENDS TO WHOLESALE POWER RATES AND RETAIL ELECTRICITY PRICES.
AND A STRATEGIC OBJECTIVE THREE IS ADVANCING ERCOT INC.
AS AN INDEPENDENT LEADING INDUSTRY EXPERT AND EMPLOYER OF CHOICE BY FOSTERING INNOVATION, INVESTING IN OUR PEOPLE AND IN EMPHASIZING THE IMPORTANCE OF OUR MISSION.
UM, SO STRATEGIC OBJECTIVE ONE 8.5 MIL, UH, MILLION 3.7 MILLION FOR STRATEGIC OBJECTIVE.
TWO 11.6 MILLION INCREASE FOR STRATEGIC OBJECTIVE, THREE 24 MILLION FOR THAT MANDATORY, UH, REGULATORY BUCKET, LEAVING US WITH A REQUEST OF 411.3 MILLION FOR DEPARTMENT NET EXPENDITURES AND PROJECT EXPENDITURES FOR 2026.
OKAY, THIS IS GONNA BREAK OUT, UM, HOW THE FLOW OF PROJECTS IN DEPARTMENT NET EXPENDITURES WORKED.
SO WE HAVE OUR APPROVED BUDGET, 45.1 MILLION IS OUR, OUR NET INCREASE, UH, FOR DEPARTMENT NET EXPENDITURES.
WE HAVE A 3.3 MILLION INCREASE FOR, UH, TAYLOR OFFICE WORK THAT IS GONNA OCCUR NEXT YEAR.
THAT'S BASELINED AT 10 MILLION FOR 2025, APPROXIMATELY 10 MILLION.
THE MARKET DESIGN PROJECT IS ROLLING TO A CLOSE, SO WE'LL SEE A DECREASE IN SPENDING OF 19.9 MILLION FOR THE RTC PLUS B PROJECT.
AND THEN OTHER PROJECTS WILL, WILL START, UH, WHICH WILL FILL 19.3 MILLION, LEAVING US ONCE AGAIN WITH THE FOUR 11.3.
OKAY, A QUICK WALK THROUGH THE PROJECTS THAT WE HAVE ON THE LIST FOR 2026.
A DATA CENTER REFRESH IS BEGINNING FOR DC SIX.
WE, SO WE ANTICIPATE 3.2 MILLION IN SPENDING DATA CENTER POWER UPGRADE.
THIS IS A, NOT QUITE ONCE IN A LIFETIME, UH, BUT MAYBE ONCE IN AN EMPLOYMENT OPPORTUNITY AT ERCOT.
THAT IS A ONE IN 20 YEAR EXPENDITURE THAT'S BEGINNING IN 2026.
SO 7.6 MILLION OF SPEND IN 2026.
AND THEN A NUMBER OF OTHER PROJECTS.
WE HAVE D-R-R-S-R-T-C PLUS B IS WRAPPING UP THE TERTIARY FIBER PATH.
UH, WE CURRENTLY HAVE TWO FIBER PATHS.
UH, ONE OF THEM IS IN A SIGNIFICANT CONSTRUCTION ZONE AND IS, UH, LESS RELIABLE THAN WOULD LIKE.
SO WE'RE ANTICIPATING A THIRD FIBER PATH TO OFFSET THE FREQUENT OUTAGES WE HAVE WITH THAT PRIMARY PATH.
UH, THAT'S AN INTERNAL PROJECT, 1.6 MILLION NMMS AND MMS AS WELL, AND A VARIETY OF OTHER PROJECTS.
UH, TAYLOR OFFICE TRANSFORMATION IS EXPECTED TO CONTINUE IN 2026, TOTAL PROJECT 63.3 MILLION, UH, FOR 2026, INCLUDING OTHER PROJECTS OF 22.3.
NOT LISTED HERE, UH, BUT SMALLER PROJECTS.
UH, KEY TAKEAWAY, UH, I WANT TO GRAB THAT ONE DOWN THERE.
DC SIX DATA CENTER REFRESH IS PROJECTED TO BE 35.3% OF TOTAL PROJECT SPEND FOR 26 AND 27 FOR THE COMBINED YEARS.
OKAY, I'LL TAKE US THROUGH OUR BUDGET DRIVER'S, METRICS AND EMPLOYEES AND DOLLARS.
THIS IS A SLIDE THAT RECOMMENDS, UH, REPRESENTS THE INCREMENTAL DOLLARS IN EMPLOYEES BY OFFICE.
THIS IS BOTH DEPARTMENT EXPENDITURES AND, UH, DEPARTMENT SPECIFIC PROJECT SPEND.
SO, UM, AND THIS ACTUALLY LINES UP THE QUESTION WE HAD EARLIER TODAY.
SO WHEN I LOOK AT CIO AND I LOOK AT PROJECTS AND DEPARTMENT NET EXPENDITURES, UH, WE'RE LOOKING AT 474 MILLION BEING ANTICIPATED
[00:45:01]
FOR CIO.CHIEF OPERATIONS OFFICE IS ACTUALLY SEEING A DECLINE WHEN WE TAKE OUT THE RTC PLUS B WORK THAT WAS BEING DONE FOR 24 AND 25.
UH, GENERAL COUNSEL SEEING A 0.4 MILLION INCREASE, CFO 0.7 HUMAN RESOURCES, A 2.4 MILLION INCREASE, AND CEO OF 1.4 TOTAL EMPLOYEES.
UH, WE'RE FOCUSING ON OUR TECHNOLOGY AND OUR OPERATIONS DURING THIS BUDGET CYCLE.
UH, SIGNIFICANTLY, WE HAVE 47 EMPLOYEES BEING ADDED INTO THE CHIEF DIGITAL OFFICER.
WE HAVE 69 EMPLOYEES BEING ADDED IN COO, GENERAL COUNSEL, 18 6 1, UH, SIX, FOUR, AND ONE FOR CFO HR AND THE CEO.
SO CAN KEY TAKEAWAYS, JUST WANNA RUN THROUGH THAT.
UM, 47.8 MILLION INCLUDES 145 INCREMENTAL EMPLOYEE POSITIONS.
AND SO 14% INCREASE FROM 20 25 76 OF THE 1 45 ARE PRIMARILY IN SUPPORT OF THAT MANDATORY REGULATORY AND BASE OPERATIONS FUNCTIONS.
AND OF COURSE, I DO WANNA POINT OUT THAT SOME OF OUR POSITIONS ARE FUNDED OUTSIDE THE SYSTEM ADMINISTRATION FEE.
WE HAVE, UM, WHICH WE'LL COVER LATER.
I'LL GIVE A, A QUICK WALKTHROUGH OF, UM, EACH EXECUTIVE'S AREA AND, OR UNLESS JP, DID YOU WANNA SPEAK TO YOURS? STRAIGHT OUT? OKAY.
I'LL LET JP SPEAK TO HIS RIGHT AWAY.
WOW, I DIDN'T KNOW YOU'RE THIS MUCH TALLER.
ALRIGHT, GIVE RICHARD A BREAK TOO.
SO I'M GOING TO FOCUS ON, UH, TWO NUMBERS HERE.
UM, THE 47, SORRY, JUST A SECOND.
THE, THE 47 FOR THE EMPLOYEES AS WELL AS THE 47.4 FOR THE, UH, DOLLARS.
AND SINCE I'M GOING FIRST I GUESS, OR I TOOK IT AWAY FROM RICHER, UH, SOME OF THE, HOW, HOW THESE NUMBERS TIE TO THE DETAILS.
UM, NOW WHY AM I GOING FIRST, I GUESS IT IS THAT 47.4 UH, MILLION, UH, NUMBER THERE, WHICH IS THE LARGEST NUMBER THAT YOU SEE ON THIS TABLE.
SO BEFORE I GET TO THE DETAILS, UM, I DO WANT TO GIVE AN OVERVIEW OF WHAT THE FIRST ROW REPRESENTS, RIGHT? IT REPRESENTS, UH, DEVELOPMENT, WHICH DOES ALL THE DEVELOPMENT FOR FEATURE CHANGES AND PROJECTS INCLUDING, UH, IF YOU WERE IN RT, IRT AND S TODAY, PROJECTS LIKE RTC.
UM, AND, AND IN THE TNS WE SHOWED THE LABOR DISTRIBUTION.
AND FOR THE PROJECTS IMPLEMENTATION, IT'S, MOST OF IT IS IT FROM A PROJECT IMPLEMENTATION PERSPECTIVE.
THEN THIS LINE ALSO REPRESENTS IT OPERATIONS THAT MANAGE THE SYSTEMS ONCE THEY'RE IN PRODUCTION, INCLUDING PATCHING AND MAINTENANCE AND, UH, AND RESOLVING PRODUCTION ISSUES.
IT ALSO INCLUDES IT INFRASTRUCTURE, WHICH IS MAINTAINING THE THREE DATA CENTERS.
WE HAVE THE SERVERS NETWORK, THE WIDE AREA NETWORK TO THE MARKET PARTICIPANTS, TELEPHONE STORE MARKET PARTICIPANTS, UH, THE VIDEO WALL IN THE CONTROL ROOM, ALL THAT.
THIS LINE ALSO REPRESENTS SECURITY, BOTH CYBERSECURITY AND PHYSICAL SECURITY.
IT ALSO REPRESENTS FACILITIES, WHICH MEANS MAINTAINING THE BUILDINGS IN TAILOR THIS BUILDING OUR BACKUP CONTROL CENTER.
UM, AND ALSO, UH, THINGS LIKE OUR UPS'S VEHICLES, DIESEL GENERATORS, THINGS LIKE THAT.
UM, IT ALSO REPRESENTS PROJECT MANAGEMENT, SOFTWARE QUALITY, IT ARCHITECTURE.
AND UM, ALSO, UH, BIG EXPENSE THAT WE HAVE IS MAINTAINING THE HARDWARE AND SOFTWARE LICENSES AS WELL.
THE, SO WE, THIS IS LINE COVERS ALL THOSE AS WELL.
AND LAST BUT NOT LEAST, IT ALSO REPRESENTS THE GRID TRANSFORMATION FUNCTIONS THAT ALLOW US TO SEE AROUND THE CORNER SO THAT WE ARE READY NOW WITH SYSTEMS THAT MY BUSINESS PARTNERS WILL NEED TWO OR THREE YEARS DOWN THE LINE SO THAT WE GET STARTED NOW.
SO AS WE CAN SEE, THERE'S A WIDE VARIETY OF ACTIVITIES THAT IS REPRESENTED IN THAT LINE.
UM, NOW I KNOW IT'S, YOU KNOW, WE TRY TO BRAND IT AS DIGITAL, BUT I THOUGHT EVEN IF I CALL IT DIGITAL, I STILL EXPLAIN IT HERE.
'CAUSE NOT, IT'S NOT SO APPARENT.
UM, SO LET ME WALK THIS THROUGH A BIT.
SO, UM, SO THIS GIVES US THE BREAKTHROUGH, WHICH I BREAK BREAKOUT, WHICH I WILL TALK THROUGH.
UM, BUT THOSE NUMBERS THAT WE MENTIONED, UM, JUST A SECOND.
[00:50:02]
SO THAT'S THE HEADCOUNT NUMBER, UM, THAT WILL, THAT I'M GONNA WALK THROUGH NEXT.AND, UM, AND THEN THE PROJECT, THE, THE, THE EXPENDITURE WHICH COVERS THE PROJECT EXPENDITURE AS WELL AS THE DEPARTMENT EXPENDITURE, RIGHT? SO, AND THAT'S THESE TWO NUMBERS WHICH ADD UP TO THE 47.4.
UM, I SHOULD MARK THESE TWO NUMBERS, RIGHT? SO, SO, SO THIS IS THE BREAKTHROUGH BREAKOUT THAT I'LL WALK THROUGH.
SO LET ME GET THROUGH THE, UM, HEADCOUNT DISTRIBUTION.
SO THIS 47 INCREASE, UH, OR THIS INCREASE FROM 404 TO 4 51, IT REPRESENTS 11% GROWTH, UM, SINCE 23 WHEN WE LAST TALKED ABOUT BUDGET.
AND THIS NOT AN ANNUAL BUDGET.
SO THIS IS A TWO BY YEARLY BUDGET.
SO THIS IS A BUDGET THAT I NEED TO KEEP, UM, GET THE WORK DONE THROUGH THE END OF 2027, RIGHT? SO THAT'S WHEN I NEED TO USE THESE NUMBERS.
SO, SO JUST HAVE TO REMEMBER THAT IN THE BACK OF MY MIND THAT THESE ARE NUMBERS THAT I NEED TO TILL THROUGH THE END OF 2027.
SO LET ME WALK THROUGH THOSE NUMBERS NOW IN DETAIL.
UM, SO MY LARGEST HEADCOUNT OF 10 HERE, UM, THAT COMES FROM ACCELERATING OUR PATCHING, WHICH IS IMPORTANT FROM OUR, UH, SECURITY PERSPECTIVE.
WE HAVE A GOAL TO BRING DOWN OUR TIME TO PATCH, UH, SIGNIFICANTLY.
UM, AND THERE'S A TREMENDOUS INCREASE OF WORK THAT WE ARE TAKING ON ACROSS THE IT ORGANIZATION AS WE LOOK TO INCREASE OUR SECURITY POSTURE HERE.
THE, THE NEXT BIG, UH, HEADCOUNT TASK HERE, UM, RELATES TO, UH, CONTRACTOR CONVERSION.
AND, UM, YOU KNOW, I'VE BEEN DIFFERING IN THIS AREA, THE CONTRACTOR CONVERSION FOR TWO BUDGET CYCLES NOW.
UM, AND THIS RELATES TO THE DOMINANT NUMBER OF EMPLOYEES WE HAVE AND THE WORK WE DO TO, UH, SUPPORT THEM.
SO TWO BUDGET CYCLES AGO ARE HEADCOUNT TO 767 AT THE END OF 2021.
AND, AND, AND THAT'S SO THE NUMBER WE HAVE TO MAINTAIN THE AMOUNT OF WORK THAT WE HAVE TO MAINTAIN TO OUR, UH, SYSTEMS AND, UH, EMPLOYEE SUPPORT, THAT'S SIGNIFICANTLY GROWN.
AND IT IS, IT IS AN, UH, EXPENSE THAT HAVE DEFERRED FOR TWO BUDGET CYCLE.
SO NOW RELATED TO CONTRACTOR CONVERSION, UM, THE MAIN THING IS THAT WE HAVE A TWO YEAR LIMIT ON CONTRACTOR CONVER CONTRACTORS.
SO WHAT WE ARE TRYING TO AVOID IS LOSING TRAINED CONTRACTORS, UM, AT THE END OF TWO YEARS, AND THEN WE SPEND TIME TRAINING THEM AND THEN WE LOSE THEM AGAIN.
SO, SO IT'S AN, UM, EFFICIENCY THING ON AND A WASTE IN IN SOME SENSE THAT WE ARE WASTING TIME TRAINING AND THEN LETTING THEM GO.
UM, BUT THE GOOD THING WITH CONTRACTOR CONVERSION IS THAT WHEN YOU CONVERT THE CONTRACTOR, WE ALSO HAVE AN OFFSET COST WHERE WE REDUCE THAT CORRESPONDING HOURS FROM CONTRACTOR BUDGET.
SO THE NEXT ONE IS, OH YES, SORRY, GO AHEAD.
WILL YOU EDUCATE ME THAT TWO YEAR LIMIT, WHERE DOES THAT COME FROM? THE TWO YEAR LIMIT ON CONTRACTORS? IS THAT A, A LAW? YEAH, CHAD CAN ANSWER THAT BETTER.
I THINK IT'S AN INTERNAL POLICY BASED UPON A RISK ASSESSMENT ON HOW, YOU KNOW, WHEN INDEPENDENT CONTRACTORS STAY TOO LONG, THE RISK OF THEM BEING CONSIDERED EMPLOYEES AND IT'S A MULTI-FACTOR TEST.
SO WE APPLY THIS KIND OF TWO YEAR PRINCIPLE TO HELP NOT TAKE ON THAT ADDITIONAL RISK THAT UNDER THAT MULTI-FACTOR TEST THAT COULD BE CONSIDERED EMPLOYEES UNDER THE LAW.
AND JP, WHAT PERCENTAGE OF THE WORKFORCE ARE CONSIDERED CONTRACTORS IN YOUR AREA? WE HAVE ABOUT, I THINK 27 OR 28 CONTRACTORS.
SO WE ARE CONVERTING HERE TOTAL ABOUT NINE.
UM, AND, AND THIS THING THAT CHAD JUST MENTIONED, IT'S NOT COMMON.
IT'S NOT, UH, UH, UNCOMMON, UH, THIS TWO YEAR, UH, CO-EMPLOYMENT RISK.
SO, UM, NEVERTHELESS, I'M NOT FIGHTING THAT.
I MEAN, I AGREE WITH IT, THAT'S WHAT IT IS, AND UH, WE HAVE TO MAKE SURE THAT WE COMPLY WITH THAT.
BUT ALL I'M JUST POINTING OUT IS THAT COMPLIANCE WITH THAT IS MEANS HOW TO SPEND A FEW MONTHS TRAINING A CONTRACTOR, WHICH I KNOW WE WILL BE LETTING GO AT THE END OF TWO YEARS.
OKAY? SO WHEREVER POSSIBLE, IF I HAVE A TRAINED CONTRACTOR AND, AND THAT WORK IS PERSISTENT, THE WORK IS NOT GOING AWAY, I WOULD LIKE TO KEEP THEM.
NOW THERE ARE CASES WHERE I'D HAVE CONTRACTORS WHERE THE WORK IS REALLY TEMPORARY, SO WE GET THEM AND, AND THEY GO OR WE, UH, DO A KNOWLEDGE TRANSFER TO OUR CURRENT EMPLOYEES.
BUT, UH, BUT IN THE CASE HERE THAT I'M TALKING ABOUT, WE HAVE THESE CONTRACTORS FOR SOME TIME AND IT MAKES MORE SENSE TO KEEP THEM.
UM, THE NEXT ONE IS A NEW DEPARTMENT OF CYBERSECURITY.
AND THIS WE HAVE COVERED IN THE BOARD, SO I WON'T COVER THAT HERE, BUT THAT'S A NASA DEPARTMENT,
[00:55:01]
THE MANAGER, AND INCLUDES FIVE PEOPLE.UM, STARTING THIS YEAR, WE ARE ALSO INVESTING IN CLOUD AND DATA ANALYTICS.
THAT'S A FOUNDATION FOR ALL AI KIND OF WORK, UM, AT, AT AIRCO.
SO THIS IS SOMETHING, SOME AREA WHERE WE DO NEED EXPERIENCED PEOPLE.
AND, UM, AND WE HAVE A TOTAL HEADCOUNT ASK OF SIX IN THIS AREA, UH, INCLUDING, UM, UM, UH, PEOPLE IN CYBER BECAUSE IT'S NOT JUST AN IT THING.
WE, THEY ALSO HAVE CORRESPONDING, UM, EXPERTISE IN CYBER TO MAKE SURE THAT WE ARE USING IT RIGHT.
AND WE DON'T HAVE ANY DATA LOSS AND ALL THOSE KIND OF STUFF THAT CYBER COVERS.
UM, WE ALSO HAVE A NEW, UH, DEPARTMENT IN GRID TRANSFORMATION, UM, WHERE, UM, UM, WE ARE TO, UH, THERE, THERE'S TWO ASK FOR A PRINCIPLE IN DISTRIBUTION AS WELL AS A PRINCIPLE IN THE AREA OF AI WITH A SPECIALIZATION IN POWER SYSTEMS. SO WE ALSO SEE A FORESEE INCREASE IN THE NUMBER OF PROJECTS THAT WE ARE DELIVERING.
UM, AND WE ARE REQUESTING THREE HEAD COUNT FOR THAT, INCLUDING WORK IN THE RESOURCE INTEGRATION SYSTEMS ENHANCEMENTS, AS WELL AS MARKET CHANGES.
UM, ONE, ONE OTHER INCREASE WE HAVE IS RELATED TO OR INCREASE IN OUR, UM, DATA SERVER ENVIRONMENT WHERE WE HAVE, UM, UM, THAT'S THE LAST RIGHT THERE, UM, WHERE A NUMBER OF SERVERS, UM, WENT UP FROM 4,600 TO 6,600 FROM THE LAST BUDGET CYCLE.
THAT'S A 42% INCREASE IN NUMBER OF SERVERS THAT WE ARE MAINTAINING.
NOW, THOSE SYSTEMS I INCLUDE ARE ADDED BECAUSE OF SYSTEMS WE ARE MAINTAINING WELL, UH, FUNCTIONS THAT WE ARE DELIVERING ARE, UM, ONE BIG CHUNK IS BECAUSE OF A NEW TEST SYSTEM THAT WE HAVE ADDED.
SO REGARDLESS OF THE BACKGROUND, THE ISSUE, THE THING IS WE HAVE AN, UH, ELEVATED NUMBER OF SERVERS THAT WE ARE MAINTAINING.
AND THERE ARE ALSO A COUPLE OF GAPS THAT WE ARE IDENTIFIED, UH, BROUGHT UP IN TNS THAT UM, UM, WE HAVE A GAP IN, UM, SUPPORTING CRR FUNCTION.
UM, SO WE ARE ADDING A HEADCOUNT TO SUPPORT THAT.
WE ARE ALSO FOCUSING ON MEASURING OUR PROCESS QUALITY, NOT JUST SOFTWARE QUALITY.
SO THERE'S A PERSON WE ARE ASKING THERE BECAUSE THAT'S AN AREA THAT WE HAVE, WE DON'T HAVE AN EXPERTISE IN WITHIN OUR GROUP.
'CAUSE OUR FOCUS ON QUALITY IS MORE ABOUT, UM, UH, SOFTWARE QUALITY AND WE HAVE AUTOMATION AND ALL THAT AROUND THAT, BUT NOT SO MUCH ABOUT PROCESS.
AND THIS IS IN CONJUNCTION WITH WHAT WE ARE DOING WITH RICHARD'S GROUP.
UM, BUT WHERE THEY, THEY ARE FOCUSED ON PROCESS, BUT ACROSS THE ORGANIZATION, THIS ONE IS FOCUSED ON IT PROCESSES AND MEASUREMENTS AND VARIOUS TO IMPROVE THAT.
SO, SO IN SUMMARY, UM, FOR HEADCOUNT, UH, IF I SPLIT IT DIFFERENT WAY, I HAVE 36 HEADCOUNT IN IT, UH, THREE HEADCOUNT ASK IN GREAT TRANSFORMATION AND EIGHT IN SECURITY, UM, AND ALSO COVER BRIEFLY THE 47.7 MILLION AS WELL.
THE PROJECTS ALONE MAKE UP 19 MILLION OF THAT 47, AND MOST OF THEM, IF YOU NOTICE, ARE IN THE OTHER CATEGORY.
SO, SO WHAT DOES OTHER MEAN? AND I THINK RICHARD COVERED THAT, RIGHT? IT'S NOT, IT MEANS PROJECTS THAT ARE MARKED MANDATORY AND DISCRETIONARY.
SO, SO A BUNCH OF THESE PROJECTS THAT, UH, RICHARD LISTED HERE, RIGHT, ARE MANDATORY PROJECTS.
WHY ARE THEY MANDATORY? BECAUSE WE ARE, UH, WE HAVE END OF LIFE ON EQUIPMENT.
UM, OR IF YOU DON'T REPLACE UM, OR TAKE ACTION, WE MAY RUN INTO COMPLIANCE ISSUES.
SO THAT, THAT'S WHY THEY, THEY'RE MANDATORY PROJECTS.
SO, UM, I JUST WANT TO CALL OUT WHAT OTHER MEANS.
UM, SO MR. CHAIRMAN, IF I COULD JUST COMMENT, WE SPENT OVER 30 PLUS MINUTES ON THIS PART OF THE BUDGET IN TNS COMMITTEE, AND ONE OF THE BIG DRIVERS WE DISCUSSED WAS THE, UH, DATA STORAGE REQUIREMENT.
THE LENGTH OF DATA STORAGE IS DRIVING UP SOME OF THE PROJECT COSTS.
SO IF THERE'S ANY WAY THAT CAN BE REDUCED OR DOWN TO SEVEN YEARS OR SOMETHING, IT WOULD REDUCE SOME INHERENT COSTS.
YEAH, SO I, THAT'S A GOOD POINT.
WE DID GO THROUGH A LOT OF THESE THINGS IN DETAIL IN TNS AND THERE WERE A COUPLE OF ACTION ACTIONS THAT CAME OUT OF THAT.
SO I WON'T GO THROUGH A LOT OF THE NUMBERS IN DETAIL GIVEN THAT WE TALKED ABOUT IT THERE.
[01:00:01]
BUT THERE ARE, UM, CERTAINLY SOME IMPROVEMENTS THAT WE WANT TO DO THAT, UH, THAT JULIE'S CALLING OUT FOR.BUT IT IS CURRENTLY, IF YOU DON'T DO ANYTHING RIGHT NOW, THERE ARE SIGNIFICANT DRIVERS OF OUR COST.
SO, SO A LOT OF THE AREAS WHERE YOU SEE O AND M COSTS, UM, UM, ASSOCIATED WITH, UM, UM, UM, I THINK THE LINE ITEM FIVE THERE.
UM, AND THAT COST IS COMPLETELY DRIVEN BY STORAGE, WHICH WE, WE HAVE A LOT OF DATA THAT WE ARE ARCHIVING AND WE HAVE COPIES OF THEM SO WE CAN DO SOMETHING BETTER.
UM, BUT STILL THAT REQUIRES AN INVESTMENT ON OUR PART TO ACTUALLY WORK ON THAT.
SO I'LL LEAVE IT AT THAT, UM, AND GET BACK TO RACHEL.
BEFORE JP LEAVES, ANY QUESTIONS FOR JP? OKAY, THANKS JP.
IN ADDITION TO WHAT JP WALKTHROUGH AS PART OF OUR BUDGET PROCESS, WE WALK THROUGH THE EFFICIENCIES, UH, THAT WHEN WE OUTLINE WHAT WE'VE DONE SINCE THE LAST BUDGET CYCLE, WHAT WE'VE DEFERRED IN THE CURRENT BUDGET CYCLE AND WHAT WE'VE CUT, UM, AND THEN PLAN IMPROVEMENTS IN RISK MANAGEMENT.
SO THIS IS, UH, JPS SLIDE, UH, SINCE THE LAST BUDGET, THEY'VE, UM, THE MS PROJECT HAS COME IN UNDER BUDGET.
THE DATA CENTER UPGRADE, UH, WENT UNDER BUDGET BY 4 MILLION.
OF COURSE, WE'RE ALL AWARE OF THE RTC PROGRESS AND THE TIMELINES THAT HAVE BEEN CUT ON RTC AND THE ESTIMATED MARKET FACING SAVINGS OF, YOU KNOW, ANYWHERE CLOSE TO A BILLION DOLLARS BY THAT ACCELERATION.
SO, SO WHAT, WHAT WE'RE DOING HERE AND THE INVESTMENTS WE'RE MAKING IN OUR PEOPLE AND TECHNOLOGY DIRECTLY TRANSLATE INTO MARKET FACING SAVINGS.
LOOKING AT THE SYSTEM PLANNING AND WEATHERIZATION AREA.
CHRISTY, DID YOU WANT TO GIVE A DISCUSSION ON YOUR AREA? WOULD YOU LIKE ME TO WALK IT THROUGH? YOU'LL GIVE IT.
SO I'M GONNA GET AN OVERVIEW OF THE, UH, THE ASK IN THE COO GROUP.
UM, AS AN OVERVIEW, REALLY IT'S BEING DRIVEN BY THREE, THREE AREAS.
SO THE, THE GRID IS GROWING VERY QUICKLY.
UH, WE HAVE, THAT PUTS STRESS IN PLACES LIKE MODELING, ESPECIALLY THE AMOUNT OF PEOPLE IT TAKES TO GATHER THE INFORMATION FROM OVER A HUNDRED DIFFERENT QU AND GENERATOR OWNERS, 20 DIFFERENT TSPS, PUT A, PUT THAT IN A MODEL, PRODUCE A WEEKLY MODEL, PRODUCE THE PLANNING MODELS, PRODUCE THE SYSTEM PROTECTION MODELS, PRODUCE THE DYNAMIC MODELS, ALL THOSE, ALL THOSE SYSTEM MODELS.
AS THE GRID GROWS, IT'S, IT'S A BIGGER DATA GATHERING, UH, EFFORT.
AND SO GRID GROWTH IS, HAS, IS ONE OF THE BIG DRIVERS.
UM, YOU ALSO SEE THAT IN, UH, GENERATION INTERCONNECTION.
OBVIOUSLY WE HAVE MORE GENERATORS BEING INTERCONNECTED NOW THAN WE'VE EVER SEEN.
UH, GENERATION INTERCONNECTION IS KIND OF UNUSUAL IN THAT, UH, SOME OF THOSE COSTS ARE RECOVERED.
SO WHEN A GENERATOR WANTS TO INTERCONNECT ON THE SYSTEM, THERE'S A FEE CHARGE AND THAT FEE COMES TO ERCOT AND IT COVERS THE COST OF THE GENERATOR, THE GENERATION STUDIES.
SO WE'VE ALSO SEEN THE GENERATION INTERCONNECTION GROUP BE A GOOD ENTRY LEVEL ENGINEERING POSITION FOR ENGINEERS THAT MOVE INTO OTHER POSITIONS AT ER ARCHIVE.
AND SO SOMETIMES CONTRACTORS THAT WE CAN USE IN THAT POSITION, AND WE HAVE, WE'VE, WE'VE TRIED TO MAINTAIN A BALANCE IN GENERATION INTERCONNECTION BETWEEN EMPLOYEES AND CONTRACTORS.
THOSE CONTRACTORS, WE GET A GOOD FEEL FOR THOSE CONTRACTORS.
WE CAN MOVE THEM INTO ENTRY LEVEL POSITIONS, AND THEN OUR ENGINEERS IN THAT POSITION CAN MOVE INTO PLANNING AND OPERATIONS IN OTHER PLACES AS WELL.
SO THAT'S A, THAT'S A GOOD ENTRY LEVEL PLACE.
IT'S A GOOD PLACE TO, TO BALANCE CONTRACTORS AND FTES.
BUT AS THE GRID CONTINUES TO GROW AND WE STILL DON'T SEE A SLOWDOWN IN THE NUMBER OF INTERCONNECTIONS AND, UM, IT'S ALSO A GOOD PLACE TO SCALE BACK.
SO IF WE WERE TO SEE GENERATION INTERCONNECTIONS START GOING DOWN, WE CAN SCALE OUR CONTRACTORS AND CONTROL THAT.
SO IT'S A GOOD PLACE TO, TO, IT'S A GOOD GAUGE THAT YOU CAN USE TO, TO CONTROL THE NUMBER OF EMPLOYEES.
UH, WEATHERIZATION IS ANOTHER PLACE.
AS YOU HAVE MORE AND MORE THINGS TO WEATHERIZE, AS THE GRID GROWS, MORE AND MORE INSPECTORS ARE REQUIRED.
THOSE ARE IN THE FIELD, HANDS-ON INSPECTIONS AND PLANNING ALSO, UM, AS WE SEE MORE VARIABILITY AND PLANNING, MORE SCENARIOS ARE REQUIRED, MORE PLANNING IS REQUIRED.
UM, AND THAT IS ANOTHER AREA WE SEE A LOT OF GROWTH.
SO GRID GROWTH IS THE MAIN AREA.
ANOTHER, ANOTHER AREA WE FOCUSED ON IS ANALYSIS IMPROVEMENT.
SO A LOT OF THESE ADDITIONS, THESE PERSONNEL ADDITIONS THAT YOU'LL SEE HAVE TO DO WITH ANALYSIS IMPROVEMENT.
[01:05:02]
UM, LARGE LOADS ARE A NEW PHENOMENON.LEARNING HOW TO INCORPORATE THOSE, LEARNING HOW TO GATHER THAT INFORMATION, LEARNING HOW TO, TO BRING THOSE INTO STUDIES.
THE, THE GENERATION INTER OR THE, THE LARGE LOAD INTERCONNECTION PROCESS.
THOSE ARE ALL PART OF ANALYSIS IMPROVEMENT.
UM, AS WE CONTINUE TO BRING IN MORE AND MORE WIND AND SOLAR, THE FORECASTING EFFORT IS, IS A BIG PART OF THIS TOO.
SO THAT'S ANOTHER PART OF THE ANALYSIS IMPROVEMENT, DEMAND FORECASTING FOR LOADS, WE'RE SEEING MORE AND MORE DEMAND FORECAST A LOT MORE NOW THAN WE EVEN SAW TWO YEARS AGO.
SO BEING ABLE TO FORECAST THAT, MAKING SURE WE HAVE THE PEOPLE IN PLACE, THE CONTRACTS IN PLACE, MAKING SURE WE'RE, UH, INTERACTING WITH, UM, RESEARCH PEOPLE TO HELP US UNDERSTAND HOW TO DO THAT, THAT'S ANOTHER PART OF THE ANALYSIS IMPROVEMENT.
AND MAYBE THE BIGGEST DRIVER, WELL I GUESS THERE'S 2, 2, 2 OF THE BIGGEST DRIVERS.
ONE IS CONTINUES TO BE BATTERIES.
HOW YOU MANAGE STATE OF CHARGE, HOW YOU MANAGE BATTERIES, HOW YOU MAN BATTERIES.
AS THAT MOVE INTO EVEN INTO MORE INTO TO ANCILLARY SERVICES, THAT IS SOMETHING THAT THE INDUSTRY HASN'T SEEN, AND WE'RE ON THE FOREFRONT OF THAT.
AND SO A LOT OF THE COMPLEXITY, A LOT OF THE ADDITIONS YOU SEE NOW ARE REALLY BASED ON BATTERY INTEGRATION AND LEARNING HOW TO MORE EFFECTIVELY INTEGRATE THOSE BATTERIES.
AND AS WE HAVE MORE IBR INVERTER BASED RESOURCES, THAT'S ANOTHER BIG DRIVER TOO THAT REQUIRES MORE ANALYSIS.
WIND, SOLAR, BATTERIES, ALL USE INVERTERS, VOLTAGE, RIDE THROUGH FREQUENCY, RIDE THROUGH GRID FORMING, THOSE ARE ALL AREAS THAT REQUIRE MORE AND MORE ATTENTION AS WE TRANSITION INTO A GRID THAT HAS MORE INVERTER BASED RESOURCES.
ANALYSIS IMPROVEMENT IS SOMETHING ELSE.
AND THEN THE THIRD ONE IS MORE OF A TRADITIONAL ONE.
UM, NEW NERC REQUIREMENTS, NEW, UH, NOGA 2 45 REQUIREMENTS, DISTRIBUTION REQUIREMENTS.
UH, WE'LL GET A NEW SLATE OF THINGS COMING OUT OF THIS LEGISLATIVE SESSION THAT WILL ALSO REQUIRE MORE ATTENTION.
AND SO REQUIREMENTS ARE PROBABLY THE THIRD AREA.
SO THAT'S, UH, THAT'S KIND OF A BROAD OVERVIEW.
DAN AND KEITH AND CHRISTIE ARE ALL HERE.
AND WE CAN GO OVER THE INDIVIDUAL PIECES TOO, IF THERE'S SOME QUESTIONS YOU HAVE ABOUT THE INDIVIDUAL AREAS.
BUT FROM A, FROM AN OVERALL PERSPECTIVE, THOSE ARE YOUR THREE AREAS THAT ARE REALLY DRIVING THE PERSONNEL INCREASES THAT YOU SEE IN THE COO AREA.
SO I CAN TAKE QUESTIONS AND DAN AND CHRISTIE AND KEITH ARE HERE TO TAKE QUESTIONS AS WELL.
ANY QUESTIONS FOR WOODY'S TEAM? OKAY.
AND I, I JUST WANNA CALL OUT, UM, IN ADDITION TO WHAT, UH, JP AND WOODY HAVE BOTH MENTIONED, I, YOU KNOW, ALL THESE HEADCOUNT REC REPRESENT CAPABILITIES.
IT'S OUR CAPABILITY TO REACT TO THE MARKET, TO LEAD THE MARKET, AND TO, UH, PERFORM STUDIES, GET PEOPLE INTERCONNECTED FASTER.
IT'S BEEN A CONSTANT AREA OF FEEDBACK WE'VE RECEIVED AS AN ENTITY, WHICH IS HOW CAN WE INTERCONNECT FASTER? HOW CAN WE CAN IMPROVE THE PLANNING PROCESSES FROM THE MARKET PARTICIPANTS? AND THIS IS, THIS IS REGULAR FEEDBACK WE RECEIVE.
WE WOULD LIKE TO MAKE THE GRID GROW AS QUICKLY AS WE POSSIBLY CAN, UH, WITHIN LIMITS.
UM, AND SO I'D LIKE TO ACCOMMODATE THOSE REQUESTS FROM MARKET PARTICIPANTS, AND ESPECIALLY IN WOODY'S AREA.
WE SEE THAT THROUGHOUT THESE DRIVERS.
UM, YOU'LL SEE THROUGHOUT ALL THE DRIVERS WHEN WE HAVE THE, THE THREE SECTIONS, DAN, UM, CHRISTIE AND KEITH'S AREAS, WE ECHO EVERYTHING WHAT HE HAS JUST SAID WITH THE NUMBER OF PEOPLE THAT WE'RE ADDING AND IN THE EFFICIENCIES.
SO 39 NEW EMPLOYEES FOR SYSTEM PLANNING, WEATHERIZATION.
A LOT OF THESE EMPLOYEES ARE OFFSET BY THE, UH, REVENUES THAT ARE GENERATED WITHIN THE FEES FOR THESE DEPARTMENTS.
AGAIN, THE EFFICIENCIES HAVE BEEN LAID OUT FOR SYSTEM PLANNING WEATHERIZATION.
IF YOU HAVE ANY QUESTIONS ON THESE, PLEASE DON'T HESITATE TO REACH OUT.
UM, WELL, I WILL POINT THIS OUT.
UH, SOME OF THE ITEMS THAT WE CUT DURING THE CYCLE, UH, KEITH DID THIS AND SO DID, SO DID DAN, WE'VE OUTLINED EXACTLY WHAT WE'VE GIVEN UP WITH THE CUTS WE'VE MADE.
SO AS YOU'RE REVIEWING THIS, YOU KNOW, THERE ARE, THERE ARE CAPABILITIES THAT WE HAVE CUT THAT WE HAVE NOT PURSUED DURING THIS, THIS BUDGET CYCLE.
GENERAL COUNSEL, I'LL, I'LL DO IT FROM HERE, RICHARD.
SO I'VE ASKED FOR 18 ADDITIONAL EMPLOYEES FOR 26 AND 27.
AND THE FIRST THING TO NOTE IS THE NAME GENERAL COUNSEL DOESN'T MEAN 18 LAWYERS.
[01:10:01]
I WANNA MAKE THAT VERY CLEAR BECAUSE THAT CAN GET VERY CONFUSING QUICKLY.YOU KNOW, MY SPAN CONTROL COVERS NOT JUST THE CORE LEGAL DEPARTMENT.
IT, IT COVERS ALL OF GILBERT'S AREA, WHICH IS THE PUBLIC AFFAIRS CLIENT SERVICES COMMUNICATIONS HAVE THE INFORMATION GOVERNANCE PROGRAM UNDER ME.
I HAVE THE COMPLIANCE DEPARTMENT UNDER ME, AND I HAVE, UH, STAKEHOLDER SERVICES AND MARKET RULES ALONG WITH OUR BOARD LIAISON GROUP UNDER ME AS WELL.
IN FACT, WHEN YOU LOOK AT, UM, THE 18 POSITIONS, THERE'S ONLY ONE OR TWO CORE LEGAL PEOPLE THAT WE'RE ADDING WITHIN THAT THOSE TWO YEARS.
AND IT'S DRIVEN MAINLY BY THE SAME THING THAT WOODY'S GROUP IS IMPACTED.
AND, AND JPS GROUP IS IMPACTED, WHICH IS NEW REQUIREMENTS BEING PLACED ON THE ORGANIZATION THAT WE HAVE TO HAVE LAWYERS, NEW CONTRACT MANAGEMENT SKILLS, BECAUSE WE'RE CONTINUING TO WORK MORE AND MORE WITH NEW VENDORS AND MORE SOFTWARE AND HARDWARE REQUIREMENTS AS WELL.
THE REST OF THIS GOES TO THOSE OTHER AREAS THAT ARE UNDER THE GENERAL COUNSEL DEPARTMENT.
AND A BIG TRANCHE OF THAT IS ON THE COMMUNICATIONS SIDE.
YOU'LL, WHEN YOU LOOK AT THESE DRIVERS AND YOU PUT 'EM TOGETHER, THERE'S ABOUT SIX FTES DRIVEN AROUND COMMUNICATIONS AS A WHOLE, BOTH EXTERNALLY AND INTERNALLY.
AND WE'VE MADE A LOT OF PROGRESS SINCE WINTER STORM URI AND HOW WE COMMUNICATE EFFECTIVELY EXTERNALLY.
WE WANT TO CONTINUE TO MOVE THE MARK ON THAT.
WE ALSO WANNA BRING IN MORE OF THE SKILL SETS ON THE AUDIO VIDEOS SIDE INTERNALLY, RIGHT NOW, WE OUTSOURCE, UH, BROADCASTING OUR MEETINGS.
WE THINK WE CAN, IT'S BETTER, MORE COST EFFECTIVE FOR US TO BRING THAT CAPABILITY IN HOUSE.
SO SOME OF THOSE FTES ARE, UH, DEDICATED TOWARD THE AUDIO VIDEO COMPONENT.
WE CAN, WHICH CAN ALSO PROVIDE ENHANCED CAPABILITIES FOR OUR EMPLOYEE MEETINGS AS WELL, NOT ADDITION TO THE, THE STAKEHOLDER MEETINGS.
UH, WE WANT TO CONTINUE TO MOVE FORWARD WITH TECHNICAL CONTENT WRITERS ON HOW WE EFFECTIVELY COMMUNICATE GRID ISSUES TO THE PUBLIC, TO THE LEGISLATURE, AND TO OUR CORE AUDIENCES.
SO SIX OF THOSE FTES ARE DIRECTLY TIED TO COMMUNICATIONS.
AN AREA THAT'S ALSO IMPACTED IS CLIENT SERVICES AND REGISTRATION AS WHAT WOODY TALKED ABOUT, THE GRID INNOVATION GOING ON AND THE GROWTH THAT IMPACTS REGISTRATION.
REGISTRATION IS A HUGE PART OF WHAT WE DO THAT'S IN THE LEGAL DEPARTMENT, AND IT CASCADES THROUGHOUT THE ENTIRE ORGANIZATION.
UH, WE'VE OBVIOUSLY HAD A TREMENDOUS AMOUNT OF NEW REQUIREMENTS UNDER THE LOAN STAR INSTRUCTION PROTECTION ACT PLACED ON THE ORGANIZATION WITH EVERY MY PARTICIPANT.
AND THE TIME THAT IT TAKES TO DO THE DUE DILIGENCE AND LOOK AT THOSE ENTITIES, INCLUDING THEIR PRINCIPLES FOR CREDIT QUALITY MANAGEMENT AS WELL, CONSUMES A LOT OF TIME.
AND SO WE NEED ADDITIONAL RESOURCES FOR THAT WITH THE GROWTH THAT'S HAPPENING.
UM, ON THE COMPLIANCE SIDE, WE HAVE BEEN SHORT ON THE COMPLIANCE SIDE FOR SEVERAL YEARS, AND YOU'LL SEE WE ACTUALLY CUT SOME COMPLIANCE FTES IN THIS ROUND AS WELL.
BUT WE ARE ASKING FOR ADDITIONAL COMPLIANCE ANALYSTS AS WELL FOR ALL THE REQUIREMENTS THAT WE TAKE ON AT THE STATE AND FEDERAL LEVEL AS WELL.
CLIENT SERVICES IS A SUPPORT GROUP FOR OUR MARKET PARTICIPANTS.
AS WE CONTINUE TO SEE MORE MARKET PARTICIPANTS COME, YOU NEED TO HAVE NEW CLIENT SERVICES REPRESENTATIVES CASCADE WITHIN THOSE GROUPS TO SUPPORT THOSE, THOSE INDUSTRY PARTICIPANTS AS WELL.
SO HOPEFULLY THAT SUMMARIZES WHAT THIS IS ALL LABOR HEADCOUNT BASED UPON GROWTH, AND TO CONTINUE TO MOVE FORWARD WITH INNOVATION AND COMMUNICATION BOTH INTERNALLY AND EXTERNALLY, THAT'S DRIVING THAT HEADCOUNT.
AND ON THIS SLIDE, IT REFLECTS SOME OF THE EFFICIENCIES.
UH, WE DO, WE ARE LOOKING AT AUTOMATING REGISTRATION IN THE LONG TERM.
THAT'S SOMETHING WE'VE BEEN TALKING ABOUT WITH THIS IN THIS ORGANIZATION FOR 20 YEARS.
IT'S STILL A VERY MUCH MANUAL, UH, PROCESS.
AND WE DO HAVE A PROJECT GOING ON WITH IT THAT ULTIMATELY WE'D LIKE TO BE IN AN ONLINE REGISTRATION PLATFORM FOR EVERY MARKET PARTICIPANT TO GO INTO, UH, A PORTAL AND BE ABLE TO CHANGE THEIR REGISTRATION INFORMATION.
NOW, WE'LL STILL HAVE TO DO ALL THE DUE DILIGENCE THAT NEEDS TO BE DONE, BUT THAT SHOULD PROVIDE LONG-TERM EFFICIENCY, BOTH INTERNALLY WITHIN THE THIS ORGANIZATION, BUT ALSO WITH MARKET PARTICIPANTS GOING FORWARD AS WELL.
WE'RE NOT ASKING FOR ADDITIONAL HEADCOUNT THERE BECAUSE WE ARE STARTING TO SEE SOME OF THE BENEFITS THAT WE'VE BEEN WORKING ON FOR THE LAST YEAR, 10 YEARS INTERNALLY AS WE MODERNIZE OUR SHAREPOINT ENVIRONMENT AND IMPLY CONTROLS.
AN AREA THAT WE STILL NEED TO FOCUS ON IS STRUCTURED DATA, WHICH IS WHY WE'RE RETAINING SO MUCH IN THE, IN THE STORAGE CONTENT.
SO THAT'LL BE INITIATIVE THAT WE WORK ON FOR THE NEXT COUPLE YEARS, UH, ACROSS THE INFORMATION GOVERNANCE AND THE IT DEPARTMENT ON HOW WE MANAGE THAT STORAGE AND HOPEFULLY WILL EVENTUALLY RESULT IN EFFICIENCIES AND SAVINGS IN THE LONG TERM.
AND THEN THIS, THIS GOES INTO SOME ADDITIONAL RISK MANAGEMENT AND PLANNED IMPROVEMENTS AS WELL.
OBVIOUSLY, WE DO CONTINUE TO LOOK AT MORE REGULATORY REQUIREMENTS PLACED ON THE ORGANIZATION.
WE'RE ALSO GOING THROUGH AN EFFORT OF WHERE CAN WE RELIEVE SOME OF THE
[01:15:01]
BURDENS OF THOSE REQUIREMENTS WHEN THEY'RE NOT PROVIDING VALUE.SO AS WE CONTINUE TO ADD, WE NEED TO ALSO BE LOOKING AT THINGS THAT WE CAN TAKE AWAY, AND BOTH ON THE MARK PARTICIPANT SIDE, ON THE ERCOT SIDE, BECAUSE IT'S NOT REALLY PROVIDING ANY VALUE, AND THAT TAKES TIME TO SEE THOSE EFFICIENCIES PLAY OUT OVER THE LONG TIME.
BUT HAPPY TO ANSWER ANY OTHER QUESTIONS OR COMMENTS FROM ANYONE.
ANY QUESTION FOR JEFF? UH, CFO, UH, WE HAVE A NUMBER OF ITEMS THAT WE'RE WORKING THROUGH.
WE HAVE A SMALL HEADCOUNT INCREASE OF SIX.
WE ARE WORKING, UH, NOW WITH QUANTIFYING OUR RISK POSTURE AND IMPROVING OPERATIONAL EFFECTIVENESS.
UH, WE HAVE BEEN TASKED WITH THOSE ITEMS. SO WE'RE GOING TO IMPROVE THE SIZE OF OUR ERM AND QUALITY FUNCTION.
WE'RE ADDING FOUR EMPLOYEES IN THAT AREA.
WE'RE OPERATING WITH CONTRACTORS AND OUTSIDE CONSULTANTS AS WE WORK THROUGH THAT AREA.
IN ADDITION TO OUR ONE DEDICATED HEADCOUNT, UH, IN THAT AREA, WE'RE CURRENTLY REPURPOSING SOME ADDITIONAL HEADCOUNTS, UH, FROM OTHER AREAS, AND WE'LL BE BACKFILLING THOSE.
UH, ONE ITEM THAT IMPACT US IS THE CHANGE IN THE IMM NEGOTIATED CONTRACT.
THAT'S A 0.8 MILLION INCREASE.
AND THEN WE'RE TRACKING ORGANIZATIONAL GROWTH.
WE'RE ADDING A HEADCOUNT THERE, UH, WITHIN THE, UH, ACCOUNTING GROUP.
AND SUPPLY CHAIN MANAGEMENT WILL HAVE ANOTHER EMPLOYEE ADDED THERE.
ONCE AGAIN, BECAUSE OF THE DRAMATIC INCREASE IN THE NUMBER OF PURCHASE ORDERS AND TRANSACTIONS THAT ERCOT IS UNDERTAKING.
AND NEGOTIATED TAX SAVINGS IS IN OUR FAVOR RATHER THAN AGAINST, UH, A LOT OF THINGS THAT WE'VE DONE.
WE HAVE STREAMLINED OUR MONTH AND CLOSE PROCESS AND FINANCIAL STATEMENT PRODUCTION.
WE HAVE PARTIALLY AUTOMATED THAT PROCESS USING SOME EXISTING TOOL SETS, UH, THAT WE'VE REDEPLOYED IN A NEW WAY.
UH, MATERIAL TIME SAVINGS, UH, WITH A SMALL TAX COMPLIANT SOFTWARE PACKAGE, UH, THAT WE BOUGHT THAT MATCHES WITH THE BAKER TILLY SOFTWARE, OUR TREASURY MANAGEMENT SYSTEM.
UH, WHEN WE THINK ABOUT THAT, WE IMPLEMENTED THE ACCOUNTS RECEIVABLE SOLUTION, UH, MATCHING MARKET INVOICE PAYMENTS.
UH, IT USED TO BE AN ENTIRELY MANUAL PROCESS, UH, BY HAND, AND NOW IT HAS A 96% AUTO, AUTO, UM, RECONCILIATION RATE, REDUCING RISK, AND INCORRECT PAYMENTS, UM, DEFERRED FROM THE PRIOR CYCLE.
BACKFILLING AN ENTERPRISE ARCHITECT, SOME SUPPLY CHAIN MANAGEMENT POSITION.
UM, THAT WAS REFLECTED ON THE FIRST PAGE.
UH, WE CUT TWO ITEMS EARLY ON IN THIS CYCLE, UH, TRYING TO RIGHTSIZE THE ASK FOR ERM AND TREASURY.
AND OF COURSE YOU SEE THE IMPROVEMENTS AND, UH, RISK MANAGEMENT BELOW.
ANY QUESTION ON THE CFO AREA? RICHARD? REPEAT AGAIN WHAT YOU SAID ABOUT THE IMM UH, CONTRACT.
THE IMM, UH, THE CONTRACT RENEWED AND ON THE CONTRACT RENEWAL, THE RATE WENT UP FOR THE IMM.
SO WE ARE, WE'RE ASKING FOR AN INCREASE TO MATCH THE ACTUAL BUDGETED RATE.
I MEAN THE ACTUAL CONTRACTED AMOUNT FOR THE IMM CONTRACT.
AND IT WENT UP 11%, IS THAT RIGHT? YES.
CONTRACTS HAVE BEEN, UH, DIFFICULT.
IT'S BEEN DIFFICULT NEGOTIATING, UM, CONTRACTS THIS YEAR.
WE HAVE A LOT OF PRESSURE FROM OUR VENDORS.
THIS WAS REFLECTED EARLIER IN A CONVERSATION.
UM, JP HAD, YOU KNOW, WE HAVE, WE HAVE CONTRACTORS CHANGING THE WAY, THE WAY THEY APPROACH CONTRACTING.
AND THIS IS JUST A, A LARGER ISSUE, UH, IN GENERAL THAT YOU'VE TOUCHED ON HERE, WHICH IS WE HAVE, UH, ESPECIALLY WITH OUR IT CONTRACTS AND OUR IT SERVICES CONTRACTS, WE'RE, WE'RE FACING A LARGE NUMBER OF LICENSE TYPE CHANGES.
SO THEY'RE CHANGING THE WAY THEY LICENSE THE PRODUCT, UH, ENFORCING A NEW NEGOTIATION WITH THIS UPDATED AND MORE AGGRESSIVE PRICING POSTURES.
WITH RESPECT TO, HOW LONG ARE THEY M CONTRACTS TYPICALLY? I BELIEVE THEY'RE THREE YEARS, BUT I'LL HAVE TO CONFIRM THAT.
MUST, MUST NOT BE A COMPETITIVE MARKET.
DID YOU WANNA WALK THROUGH? THANK YOU.
SO FROM AN HR STANDPOINT, THERE'S THREE BUCKETS THAT I'M LOOKING AT.
ONE IS JUST THE OVERALL GROWTH OF THE COMPANY, EXCUSE ME.
SO THE NEED FOR HR TO BE ABLE TO EFFECTIVELY SUPPORT AND CONTINUE TO SUPPORT OUR BUSINESSES ACROSS THE COMPANY.
ALSO, WE HAVE CENTRALIZED BUCKETS OF COSTS WITHIN HR THAT SUPPORT RECRUITING AND RETENTION EFFORTS AND PROGRAMS ACROSS THE ENTIRE COMPANY.
SO EVEN THEY, THOUGH THEY FALL IN HR, THEY ACTUALLY WORK TO SUPPORT DIFFERENT EFFORTS ACROSS THE COMPANY.
AND THIRD, IT'S INVESTING IN OUR PEOPLE, WHICH WE'VE TALKED ABOUT, UM, EARLIER IN THIS PRESENTATION, WE'VE MADE A CONCERTED EFFORT THAT
[01:20:01]
IT'S IMPORTANT TO INVEST IN OUR PEOPLE, UM, TO GROW THEIR SKILLS AND THEIR TALENT.BUT BY DOING THAT, IT'S NOT JUST INVESTING IN OUR PEOPLE, IT'S INVESTING IN OUR COMPANY AS WELL, BECAUSE THAT POSITIONS US TO REALLY UPSKILL OUR TALENT AND MAKE THEM READY FOR WHAT WE NEED DOWN THE ROAD, UM, WHICH IS REALLY IMPORTANT.
AND IT REDUCES THE RISK OF US HAVING TO PAUSE CERTAIN ISSUES IF WE DON'T HAVE SOMEONE READY TO FILL THOSE CRITICAL ROLES.
UM, BUT BY OUR SUCCESSION PLANNING AND OUR WORKFORCE TALENT PLANNING AND ALL THOSE DIFFERENT EFFORTS, IT REALLY HELPS REDUCE RISK AND PROTECT THE BUSINESS AS WELL AS TO PROMOTE OUR EMPLOYEES AND THEIR PROFESSIONAL DEVELOPMENT.
UM, AS FAR AS THE POSITIONS, UM, WE HAVE FOUR POSITIONS THAT WE'RE ASKING FOR WITH THE RAMP UP OF A HEADCOUNT THAT WE'VE SEEN OVER THE LAST COUPLE OF YEARS.
WE HIRED, AND THIS IS NOT NEW ADS, JUST, UM, THE ACTUAL ACTIVITIES WITH ONBOARDING DUE TO BACK FILLING AS WELL.
WE HIRED 163 EMPLOYEES IN TWENTY TWENTY THREE, A HUNDRED AND FIFTY FIVE LAST YEAR.
AND THEN WITH NEW POSITION ADS, AS WELL AS HR MANAGES THE ENTIRE CONTRACTOR BUDGET, THE CONTINGENT WORKER PROGRAM.
AND SO THERE'S A LOT OF ONBOARDING AND SUPPORTING RUNNING ALL OF THOSE BACKGROUND CHECKS AND PRAS TO MAKE SURE THAT WE'RE COMPLIANT.
SO IT'S THAT ENTIRE PROGRAM AS WELL THAT WE'RE SUPPORTING.
SO FOR THAT REASON, WE'RE ASKING FOR TWO PEOPLE ON OUR HR OPERATIONS SIDE TO SUPPORT THOSE ONGOING ACTIVITIES.
AS WELL AS WE'VE ALSO CHANGED OUR, THE COMPLEXITY OF OUR COMPENSATION PROGRAMS OVER THE LAST SEVERAL YEARS.
WE'RE VERY CONSCIENTIOUS OF MAKING SURE THAT WE GO OUT, THAT WE MARKET PRICE, WE PUT TOGETHER COMPETITIVE, UM, COMPENSATION PACKAGE, AND WE'VE ADDED DIFFERENT COMPENSATION COMPONENTS WITHIN THAT TO MAKE SURE THAT WE'RE COMPETITIVE, TO MAKE SURE THAT WE ARE ABLE TO OBTAIN THE, THE TALENT THAT WE NEED AND, UH, TO ATTRACT THEM AND TO RETAIN THEM.
SO WE'RE ALSO ADDING A COMPENSATION PERSON WITHIN THOSE TWO OPERATIONAL HR HEADCOUNT REQUESTS.
UM, WE ARE ASKING FOR SOMEONE TO HELP OUT WITH THE RECRUITING AS WELL.
UM, YOU KNOW, WE TALKED ABOUT ASKING FOR ADDITIONAL FTES, AND THAT'S ONE OF THE THINGS THAT WE CUT BEFORE WE EVEN CAME FORWARD WITH THIS BUDGET CYCLE.
UM, ADDITIONAL FTES FOR RECRUITING TO SUPPORT OUR ONGOING EFFORTS.
BUT FOR THE MOST PART, WE THINK WE CAN RAMP UP AND DOWN AS WE NEED TO USING CONTRACT RECRUITERS.
WE'VE BEEN VERY SUCCESSFUL WITH THAT OVER THE LAST SEVERAL YEARS.
UM, BUT WE ARE ASKING FOR ONE INDIVIDUAL AS A RECRUITER, UM, THAT WILL HELP WITH ALL OF THE COORDINATING OF THE SCHEDULING, THE TALENT AND THE HIRING COMPLIANCE, AND DOING SOME RECRUITING AS WELL.
AND THEN FINALLY, WITH RESPECT TO ALL OF OUR WORKFORCE PLANNING INITIATIVES AND SUCCESSION AND, AND REALLY LOOKING AT OUR TALENT MANAGEMENT, WE'RE ASKING FOR A CHANGE MANAGEMENT INDIVIDUAL AS WELL TO JOIN OUR ORGANIZATIONAL DEVELOPMENT TEAM.
WE HAVE DONE A LOT OF, UM, A LOT OF EFFORT AND A LOT OF WORK WITH THE BUSINESS OVER THE LAST COUPLE OF YEARS ON THESE TALENT STRATEGIES.
UM, AND WE'LL BE CONTINUING TO DO THAT AS WE'VE LEARNED MORE FROM OUR WORKFORCE PLANNING ACTIVITIES.
SO THIS PERSON WOULD SIT WITHIN THAT TALENT STRATEGY TEAM AND REALLY WORK WITH THEM TO ENACT CHANGE, BUT ALSO LOOK AND IDENTIFY ANY KINDS OF RISK, UM, ASSOCIATED WITH THAT, IDENTIFY THOSE BEFORE WE ROLL OUT CHANGE, WHETHER IT'S WITHIN OUR HR AND OUR TALENT STRATEGY ACTIVITIES, OR MAYBE IT'S EVEN OUTSIDE ACROSS THE ORGANIZATION PARTNERING, SAY WITH, UM, QUALITY ASSURANCE AND, AND THINGS LIKE THAT.
NOW, WE HAVE IDENTIFIED SAVINGS $0.2 MILLION IN SAVINGS.
AND THOSE WERE FROM THE, UM, IN THIS LAST BUDGET CYCLE, WE'VE BEEN VERY SUCCESSFUL IN IDENTIFYING AND, AND FINDING THE TALENT WE NEED WITHOUT USING EXTERNAL RESOURCES TO THE EXTENT THAT WE THOUGHT WE WOULD.
SO THINGS LIKE EXTERNAL STAFFING AGENCIES OR DIRECT HIRE PLACEMENT.
SO WE SAW SAVINGS FROM THAT AS WELL AS OVER THE LAST COUPLE OF YEARS, CHANGING OUR POSTURE TO BE MORE ONSITE AND HYBRID VERSUS A MORE REMOTE POSTURE AND IN INCENTIVIZING OR FINDING ROOM FOR EMPLOYEES TO COME ONSITE TOGETHER.
SO THE TOTAL ASK FOR 26, 27 FROM HR ARE FOUR HEADCOUNTS.
AND THEN, UM, 2.4 FOR THOSE ADDITIONAL COSTS TO SUPPORT THE ORGANIZATIONAL RECRUITING AND RETENTION EFFORTS, AND THEN THE LABOR FOR HR AS WELL.
AND ON THE NEXT SLIDE, YOU'LL SEE SOME OF THE, THE RISK MITIGATIONS AND THE SAVINGS THAT WE TALKED THROUGH.
I TALKED ABOUT HOW WE'D HAD SOME INITIAL DISCUSSIONS ON, YOU KNOW, HIRING, RECRUITING FTES.
WE REALLY WANT, DIDN'T WANNA DO THAT, AND THEN HAVE A HIGHER NUMBER OF FTES.
WE HAVE FOUND SUCCESS IN RAMPING UP AND DOWN AS WE NEED TO WITH CONTINGENT WORKERS.
WE ALSO HAD, WE WERE GOING TO ASK FOR A COMPENSATION CONSULTANT AND THE LAST BUDGET CYCLE, BUT WE DEFERRED THAT TO THIS TIME.
[01:25:01]
A BENEFITS PROFESSIONAL AS WELL, JUST AGAIN, THE ONGOING EFFORTS TO, UM, TO SUPPORT OUR EMPLOYEES THE WAY WE NEED TO, AND NOT BACK DOWN ON SOME OF THESE EMPLOY IMPORTANT TALENT MANAGEMENT AND WORKFORCE PLANNING STRATEGIES.UM, AS FAR AS RISK, UM, THE CHANGE MANAGEMENT PERSON WE THINK WILL HELP WITH THAT, UM, AND REALLY HELP THE DEPARTMENT AND EXTERNALLY AS WELL OUTSIDE OF HR TO IDENTIFY RISK, BUT ENACT CHANGE, WHICH WE REALLY NEED TO.
WE ARE A DYNAMIC ORGANIZATION NOW.
WE HAVE TO PIVOT AND CHANGE QUICK, QUICKLY AS OUR WORK AND PRIORITIES CHANGE.
SO THAT INDIVIDUAL WOULD HELP US WITH THAT.
WE'VE ALSO DONE A LOT OF WORK OVER THE LAST COUPLE OF YEARS, WHETHER IT'S FROM THE CANDIDATE EXPERIENCE, ONBOARDING OUR INTERNAL PROCESSES, OUR INTERNAL ORGANIZATIONAL STRUCTURE, AND, UM, CHANGED OUR STRUCTURE.
WE REPURPOSED POSITIONS WITHIN OUR TEAM TO REALLY WORK ON THESE TARGETED EFFORTS THAT ARE IMPORTANT, UM, FOR OUR FUTURE, UM, AS AN ORGANIZATION.
AND THEN, UM, ALSO THE OPERATIONAL EFFICIENT EFFICIENCIES FROM JUST, YOU KNOW, REALLY TACKLING OUR PROCESSES, STREAMLINING THEM, OR EVEN MOVING AWAY FROM PAPER FILES INTO ELECTRONIC FILES.
I MEAN, IT'S EVERYTHING WE COULD TO DO TO REALLY ENACT, YOU KNOW, OPERATIONAL EFFICIENCIES ACROSS THE DEPARTMENT.
ALRIGHT, LET'S MOVE BACK INTO, UM, BACK INTO THE NUMBERS.
SO WE'VE HEARD THE OVERVIEWS OF EVERYONE'S GROUPS.
WE'VE HEARD HOW WE'RE CHANGING.
UH, THE REASONS FOR THE ADS JUST WANT TO REMIND US OF OUR HISTORY OF THE REVENUE TRENDS OVER TIME.
WE'VE HAD SYSTEM ADMINISTRATION FEE REVENUE, UH, STEADILY, UH, OVER 93% WHEN WE'RE LOOKING AT USER FEES.
GENERATION INTERCONNECTION, UH, HAS INCREASED OVER TIME.
IF YOU'LL LOOK AT THE FORECAST ON THE RIGHT SIDE, ON LINE THREE, UH, INTERCONNECTION REQUEST FORECAST IS UP TO 7.2 MILLION FROM 5.3 BUDGETED AND 4.8 ACTUALS FROM 2024 AND 3.2 IN 2023, STEADY INCREASE IN THAT WORK, WEATHERIZATION INSPECTION WORK.
AND THE COST OF THOSE HAS, UH, CLIPPED AT A STEADY PACE, AS WELL AS WIDE AREA NETWORK PRIMARY REVENUE ASSUMPTIONS.
OUR FEE STRATEGY IS TO SEEK, TO MAINTAIN FAIR, STABLE, AND PREDICTABLE FEES.
OUR ENERGY FORECAST IS BASED ON THE ERCOT ADJUSTED LOAD FORECAST CRITERIA, AND THAT'S GONNA BE DISCUSSED TOMORROW IN THE BOARD OF DIRECTORS.
ITEMS 8.1 ITEM 8.1, UM, USER FEES, 26 AND 27 REQUESTS ARE BASED ON MANAGEMENT ESTIMATES OF, OF ACTIVITY.
AND THE 2028 TO 2031 PROJECTIONS ARE GROWN BY CAGR, THE COMPOUND ANNUAL GROWTH RATE.
UH, PREVIOUS TO THIS BUDGET CYCLE, THIS SLIDE HAS ALWAYS SHOWN, UM, DEPARTMENT NET EXPENDITURES GROWING FASTER THAN ENERGY GROWTH.
SO WHAT WE'RE SEEING THIS YEAR IS AN INVERSION OF THOSE TWO CURVES WHERE WE EXPECT IN THE LONG TERM TO SEE ERCOT DEPARTMENT NET EXPENDITURES COST GROWTH TO FALL BELOW THE RATE OF COMPOUND ENERGY GROWTH, UH, OVER TIME.
SO 2031, UH, FROM 2028 TO 2031, WE'RE SEEING THAT THAT INVERSION.
RICHARD, CAN I ASK YOU A QUESTION ON THE LAST LINE? SURE.
UM, I THINK THE ANSWER IS NO, BUT THE QUESTION IS, DID, DO WE EVER, UH, THE SLIDE THAT LOOKS AT THE REVENUES, DO WE EVER LOOK AT P AND LS INSIDE OF ERCOT OR WE JUST ROLL ALL THIS REVENUE UP TO THE TOP LINE, REGARDLESS OF THE COST OF DOING THAT, THE BUSINESS BY LINE? NO, WE, WHEN WE, WHEN WE THINK, I'M SORRY, WAS THAT THAT WAS TO ME THAT WAS TO YOU, BUT I WAS LOOKING AT PABLO.
SO WHEN WE THINK ABOUT, UH, WHEN WE LOOK IN THE APPENDICES, YOU'LL SEE HOW WE ROLL THAT TOGETHER.
SO THE, THE DEPARTMENTAL, UM, EXPENSES ARE ROLLED TOGETHER WITH THE FEE REVENUE.
AND OUR GOAL WITH FEE REVENUE IS TO OFFSET EXPENSES.
OUR GOAL IS AS WE'RE NOT FOR PROFIT, WE'RE NOT LOOKING TO MAKE A PROFIT.
SO WE'RE LOOKING FOR, FOR COST RECOVERY ON ALL OF OUR FEES.
BUT COULD YOU SHOW THE BOARD THE COST OF DOING THESE LINE ITEMS? IF SO, WE COULD SEE IF WE'RE BREAKING EVEN OR MORE.
WE DO THAT AS AN INTERNAL ANALYSIS.
I COULD SHOW THAT TO YOU FOR SURE.
I THINK YOUR QUESTION IS THOUGH, DO WE HAVE THE EQUIVALENT OF DEPARTMENTAL P AND L? WAS THAT YOUR QUESTION? WELL, I'M NOT SURE THIS IS A DEPARTMENT, BUT COMPLETELY.
BUT IS THIS ALL UNDER CHRISTIE? I DON'T KNOW.
FROM A REVENUE PERSPECTIVE, THE, YOU'RE RIGHT.
WE DO NOT BREAK DOWN OUR REVENUE BY MAJOR FUNCTIONAL PARTS OF THE ORGANIZATION AND ATTRIBUTE REVENUES TO THEIR COSTS BECAUSE WE REALLY ONLY HAVE ONE PRODUCT.
OUR ONE PRODUCT IS THE SERVICES IN THAT ARE INTEGRATED,
[01:30:01]
AND THE WAY THAT WE GET THE REVENUE IS BASED ON AN ESTIMATE OF THE, UH, ENERGY USAGE BY CUSTOMER.SO WE WOULDN'T REALLY HAVE A WAY TO BREAK DOWN THE OPERATIONS CONTRIBUTIONS TO REVENUES VERSUS THE HR ORGANIZATIONS.
WELL, THE COROLLARY QUESTION IS, WOULD WE CHANGE OUR PRICING IF WE HAD DONE THAT FOR THESE SERVICES, IF WE KNEW HOW MUCH IT COST US TO DELIVER THOSE SERVICES, CHANGE PRICING, WHEN AT THE, AT THE FEE LEVEL, WHEN WE'RE, WE DO ADJUST THE FEES REGULARLY AND WE ADJUST IT BASED ON THE COST OF DELIVERING THAT PARTICULAR SERVICE.
YOU DO THAT ANALYSIS SOMEWHERE? WE DO, YEAH.
SO WE, WE REGULARLY UPDATE THE FEE SCHEDULE.
WE DON'T REGULARLY, BUT WE UPDATE IT AS FREQUENTLY AS, AS WE HAVE CHANGES THAT ARE SIGNIFICANT ENOUGH FOR US TO MAKE THE CHANGE AT THE FEED LEVEL.
SO WE ARE ACTUALLY LOOKING AT THIS AREA THIS YEAR, AND WE EXPECT WE'LL BE COMING BACK WITH A FEE INCREASE WHEN, ESPECIALLY WHEN WE'RE THINKING ABOUT THE INTERCONNECTION AREA, UM, AS THE, THE COST STRUCTURE AROUND THAT GROUP AND THE GROWTH THERE IS DEMANDING, UH, ADDITIONAL HIRE FEES FOR SOME OF THE ACTIVITIES THAT WE'RE PERFORMING BASED ON THE NUMBER OF HOURS THAT WE SPEND ON EACH ACTIVITY.
WE DO TRACK THAT AGAINST COST, IF THAT'S WHAT WAS THE QUESTION? GREAT.
I WANTED TO SHOW THE IMPACT ON THE SYSTEM ADMINISTRATION FEE RATE, UH, VERSUS INTEREST INCOME.
SO THE, TO ORIENT YOU TO THIS SLIDE AND THE REMAINDER OF THE SENSITIVITY ANALYSIS, WE'LL SEE IN THIS, IN THIS PRESENTATION, WE'RE CENTERED ON 83.6 MILLION.
THAT'S OUR EXPECTED CASH BALANCE AT THE END OF 2027, BASED ON CURRENT ASSUMPTIONS.
SO HERE WE'RE SHOWING WHAT WOULD HAPPEN IN A CHANGE IN CRR FUNDING.
FOR INSTANCE, IF CRR, UM, AUCTION RECEIPT BALANCES FELL TO 1.8 BILLION, AND OUR ASSUMED, UH, AVERAGE GENERAL INTEREST RATE HELD STEADY AT 2.49 FOR 26 AND 27, WE'D EXPECT TO SEE A DECLINE FROM 83.6 MILLION TO 68.6 MILLION DURING THAT PERIOD OF TIME.
UH, LOOK AT, AT IT A DIFFERENT WAY.
IF WE HAD A DECLINE IN THE INTEREST RATE FROM 2.49 TO 1%, AND WE HELD STEADY AT 2.1 BILLION, WE WOULD SEE A FALL FROM 83.6 MILLION IN ENDING CASH TO 20.9 IN ENDING CASH IN 2027.
SO EVERY, EVERY 1% CHANGE IN THE AVERAGE INTEREST RATE IS APPROXIMATELY EQUAL TO, UH, FOUR PENNY CHANGE IN THE SYSTEM ADMINISTRATION FEE RATE.
SO INTEREST AS, UH, WE KNOW HAS A BIG IMPACT ON ERCOT CASH BALANCE AND OUR, UM, SYSTEM ADMINISTRATION FEE RATE BY DEFAULT.
WANNA TALK A LITTLE ABOUT OUR PROPOSED INTEREST RATE ASSUMPTIONS.
UH, WE'RE USING THE SAME SOURCE WE USED DURING THE PREVIOUS BUDGET CYCLE.
WE'VE ADDED ADDITIONAL SOURCES, AND I HAVE A COUPLE OF GRAPHS IN HERE, I THINK YOU'LL FIND INTERESTING.
THIS IS THE YIELD CURVE FROM THE ATLANTA FED.
SO THIS FEDERAL RESERVE PROJECTION OF HOW THEY EXPECT INTEREST RATES TO CHANGE WITHIN A BAND.
SO THE CURRENT, CURRENT TARGET 4 25 TO FOUR 50, AND THEN WE HAVE PLUS OR MINUS 150 BASIS POINTS AROUND, UM, THAT, UH, 3.24 OR SO RATE AT THE, AT THE TERMINAL IN, UH, 1215 OF 2027.
UM, OF COURSE, IT IS A BAND, IT'S A LARGE BAND.
THE, THE LINE IN THE MIDDLE IS THE MOST LIKELY PATH.
WE ALSO SOURCE INFORMATION, UM, FROM CME GROUP, UH, LOOKING AT THE FED WATCH TOOL THAT THEY HAVE.
IT ALIGNS CLOSELY, BUT IT'S NOT ENTIRELY ALIGNED WITH THE FED FORECAST.
AND THEN I WANTED TO SHOW YOU PREVIOUS FED FORECAST OF INTEREST RATES.
SO AS THE ENTITY THAT SETS INTEREST RATES, THIS IS, UH, THE RED LINE IS ACTUALS.
THE, UH, DOTTED LINES ARE POINT IN TIME PROJECTIONS OF FUTURE EXPECTED INTEREST RATES AT THAT TIME.
SO FEE PROJECTIONS CONTINUE TO SHOW A DOWNWARD TREND RECENTLY.
AND, UM, THE FED, THE FED ITSELF HAS DIFFICULTY WITH MAKING THIS AN ACCURATE PROJECTION INTO THE FUTURE.
IF THERE ARE ANY SIGNIFICANT CHANGES IN INTEREST RATE BETWEEN NOW AND JUNE MEETING, UH, OF COURSE WE'LL UPDATE, UH, MATERIALS TO ACCOUNT FOR THEM.
ANY QUESTIONS ON THE INTEREST RATE SLIDES? OH, I HAVE ONE MORE.
UH, THESE ARE OUR INTEREST INCOME ASSUMPTIONS.
UH, INTEREST RATES BY YEAR FOR 25 WITH ESTIMATED 4.5% FOR 20 26, 2 0.7 3 27, 2 0.26, AND, UH, OUT YEARS AT 1.75.
UH, IT'S BASED ON A 2.1 BILLION BALANCE IN CONGESTION REVENUE RIGHTS, AUCTION, UH, FUNDS, AND ALL FUTURE, UH, INTEREST RATE ASSUMPTIONS ARE BASED ON THE CURVE OF LESS 100 BASIS POINTS,
[01:35:03]
MEANING 26 AND FORWARDS.AS WE LOCK IN MORE INTEREST RATES BETWEEN NOW AND, UH, THE JUNE BOARD MEETING, OF COURSE, WE WILL, WE'LL CONTINUE EXAMINING THE INTEREST RATE THAT WE'RE, WE'RE DEMONSTRATING.
DEBT STRATEGY IS TO COMPLY WITH THE BOARD'S DEBT STRATEGY GUIDANCE, MAINTAIN OR IMPROVE OUR FINANCIAL INTEGRITY, MAINTAIN STABLE, FAIR, PREDICTABLE FEES, AND PROVIDE LOWEST COST TO FEE PAYERS.
CAN YOU JUST REMIND US WHAT, WHAT HAPPENS IN THIS UNCERTAIN ENVIRONMENT IF WE WERE SUDDENLY TO TAKE A NOSE DIVE LIKE THE ECONOMY DID IN THE LATE 2008 TIMEFRAME? WHAT, WHAT FLEXIBILITY DO WE HAVE IF WE SET A SYSTEM ADMINISTRATION FEE NOW AND WE WANNA CHANGE IT IN THAT SCENARIO? WELL, THAT WE COULD CHANGE THE SUSPENDED ADMINISTRATION FEE RATE.
OUR FIRST, OUR FIRST GOAL WOULD BE TO CUT COSTS AND FIND SAVINGS WITHIN THE ORGANIZATION BEFORE WE WENT FOR A FEE RATE INCREASE.
SO FROM A FLEXIBILITY PERSPECTIVE, IN THE EVENT OF A MAJOR ECONOMIC DISLOCATION, WE WOULD ANTICIPATE ADD-ON, UM, IMPACTS TO THE ENERGY MARKET AS FAR AS PRODUCTION INTERCONNECTION, WE WOULD THINK THESE THINGS WOULD DECLINE IN CONCERT WITH THAT.
SO FIRST WE WOULD REACT INTERNALLY BY CUTTING COSTS AND REEXAMINING THE DEMAND FOR LABOR AND OUR OUTCOMES.
UM, SO MUCH OF WHAT WE DO, AS WAS MENTIONED EARLIER, IS WE'RE WE'RE SHOOTING FOR OUTCOMES.
AND SO IF OUR OUTCOME TARGETS HAVE DECLINED, WE CAN REACT THERE FIRST WHEN WE GO THROUGH SOME OF THE SENSITIVITY ANALYSIS LATER, I CAN SHOW YOU, UM, HOW BAD IT WOULD HAVE TO GET, UH, IN THE MARKETPLACE BEFORE WE WOULD NEED TO MAKE A CHANGE TO OUR BUDGETED SYSTEM ADMINISTRATION FEE RATE.
AND THEN, AND I'LL PICK UP THIS CONVERSATION THEN AND WE CAN CLOSE IT OUT IF THAT'S OKAY.
AT THE MOMENT, WE ANTICIPATE, UH, NO CRR BORROWING BALANCE.
WE ANTICIPATE A 83.7 UM, MILLION CASH BALANCE AT THE END OF 2027.
OUR NOTES PAYABLE BALANCE CONTINUES TO BE PAID DOWN BY 4 MILLION PER YEAR.
UM, AND OUR CURRENT CRR UH, AUCTION RECEIPTS CAN BE USED UP TO OUR UNDRAWN BORROWING CAPACITY UNDER OUR CREDIT FACILITIES, WHICH IS CURRENTLY 125 MILLION.
THAT AMOUNT IS SET BY THE BOARD, SO THAT IS, THAT IS A FLEXIBLE AMOUNT.
IF WE NEEDED TO CHANGE, WE COULD ALSO CHANGE THERE.
UH, WE HAVE AN OPTION TO EXTEND THE FACILITIES TO 150 MILLION WITH PC APPROVAL.
UM, YOU'RE FAMILIAR WITH THIS CHART.
IT'S BEEN IN OUR MATERIALS FOR A LONG TIME.
WE'RE AT A CURRENT NEW HIGH OF 2.184 BILLION IN CRR AUCTION RECEIPTS.
AGAIN, THOSE, THOSE RECEIPTS CONTINUE TO SHIFT FROM LONG TERM TO SHORT TERM.
THERE'S A PREFERENCE FOR THE SHORT TERM HORIZON ON THE AUCTION RECEIPTS.
OUR, UM, BORROWING LIMIT AS CURRENTLY SET IS AT THE, UH, 100 MILLION LEVEL, AND THAT'LL EXPAND TO 1 25 AND THEN ONE 50 WITH PUC APPROVAL.
ALL RIGHT, FEE RATE OPTION SUMMARY.
LET ME MOVE THIS V RATE OPTION SUMMARY.
SO WE'RE RECOMMENDING THE FIRST OPTION.
WE HAVE CREATED SEVERAL OPTIONS.
UH, OPTION ONE IS REACHING 50 MILLION, UH, AT THE END OF 2029 AND FORWARDS EVERY TWO YEARS AFTER THAT.
THE FIRST STOP ON THAT RUNG IS 83.6 MILLION.
AND WE HAVE A NUMBER OF ITEMS THAT WE'RE WATCHING ON THAT ENDING CASH BALANCE.
ONE, OF COURSE, IS THE INTEREST RATE VOLATILITY THAT WE'RE EXPERIENCING.
THE OTHER IS THE LOAD FORECAST.
WE'LL DISCUSS THAT MORE IN A 0.1.
AND THERE IS SOME UNCERTAINTY AROUND LONG-TERM LOAD FORECAST AND THE REVENUES THAT ARE AVAILABLE TO ERCOT.
SO WE INTEND TO KEEP A SLIGHTLY HIGHER THAN NORMAL, UM, CASH BALANCE AT THE END OF 2027, UH, AND THEN DECLINING TO OUR NORMAL CASH BALANCE AT THE END OF 2029, WHICH IS AROUND 50 MILLION.
WE ALSO MODELED A, UH, TWO YEAR RATE WITH REACHING 75 MILLION AND MAINTAINING THAT, THAT WAS TOO HIGH FOR US.
UH, JUST AFTER WE LOOKED AT THAT OPTION THREE, UH, FOUR, FOUR YEAR RATE CHANGES, WE PREVIOUSLY MODELED LONG-TERM RATE CHANGES AND OFTEN CHOSE A LONG-TERM RATE MODEL.
THIS, UM, WITH THE CURRENT VOLATILITY THAT WE'VE HAD WITH INTEREST RATES, AND NOW WITH THE NEW ADJUSTED LOAD FORECAST, WE ARE GOING TO MAINTAIN THE TWO YEAR CYCLE THAT WE ESTABLISHED IN THE PRIOR BUDGET CYCLE FOR 24 AND 25.
UM, AND THAT WAS THE REASON WE DID NOT CHOOSE THAT MODEL.
BUT THAT SHOWS A 61 CENT, UM, SYSTEM ADMINISTRATION FEE RATE THAT WOULD EXTEND OUT TO 2029.
AND THEN IN 2030, SHIFTING TO 62 CENTS FOR THE NEXT FOUR YEARS,
[01:40:02]
OPTION FOUR WAS A 61 CENT DROP TO 61 CENTS AND HOLDING IT, WHICH WOULD BEGIN DROPPING OUR, UM, FEE RATE.I MEAN, WE'LL BEGIN DROPPING OUR CASH BALANCE AT THE END OF 2023 TO BELOW THAT 50 MILLION THAT WE'RE COMFORTABLE WITH.
ANY QUESTIONS ON THE OPTIONS? NO.
BUDGET SUMMARY UNDER THESE CONDITIONS, UH, 61 CENT FEE RATE IS MODELED FOR 26 AND 27, DROPPING TO 59 CENTS FOR 28 THROUGH 31 DEPARTMENT NET EXPENDITURES IS A 20.7, UH, PERCENT INCREASE FROM THE FORECAST FOR 2025, AND ABOUT A 14.5% INCREASE FROM THE BUDGET FOR, UH, 2025.
PROJECT EXPENDITURES ARE EXPECTED TO INCREASE TO 48.7.
WE WALKED THROUGH THAT PROJECT LIST EARLIER, AND THEN 84.3 IN 2027, LINE SIX, THE MARKET DESIGN PROJECT IS WRAPPING UP IN 2026.
UM, AND WE'RE PICKING UP SOME ANCILLARY PROJECTS THAT GO ALONG WITH RTC PLUS B IN 26 AND 27 TAYLOR OFFICE TRANSFORMATION, UH, THE PRIMARY RENOVATIONS WILL END IN 2026, AND THEN IN 2027, WE'RE ANTICIPATING EXPANDING THE TAYLOR FOOTPRINT TO ACCOMMODATE THE FULL, UM, TO FULLY ACCOMMODATE THE ERCOT EMPLOYEES THAT ARE PROJECTED BETWEEN THIS YEAR AND NEXT YEAR.
INTEREST INCOME, UH, EXPECTED TO BE 100 MILLION IS OUR FORECAST FOR 2025, UH, DROPPING TO 55.8 AND 46.
WE'LL KEEP AN EYE ON THOSE BETWEEN NOW AND THE JUNE BOARD MEETING TO SEE IF THERE IS AN ADJUSTMENT THAT WE NEED, LEAVING US WITH A CASH BALANCE AT THE END OF 2025 OF 218.5.
THAT'S DUE TO THE SIGNIFICANTLY FAVORABLE INTEREST INCOME YOU'LL SEE ON LINE 11, 4 24 AND TWENTY FIVE, A HUNDRED FOURTEEN 0.2 MILLION, AND THEN 100 MILLION.
WE'LL BEGIN CONSUMING THAT CASH IN 2026.
ALONG WITH THE FEE RATE CUT, IT'LL TAKE US DOWN TO 174.4 MILLION, AND THEN 83.6 MILLION IN 2027.
AND THEN OUR CASH WILL LEVEL OUT AFTER THAT AT APPROXIMATELY 50 TO 60 MILLION RANGE BASED ON CURRENT PROJECTIONS.
ANY QUESTIONS ON THIS SLIDE? OKAY.
SOURCES AND USES, UH, TOTAL SOURCES ARE EXPECTED, FOUR 74 MILLION FOR 2026 AND 556000000.9 MILLION FOR 2027, INCLUDING, UH, UTILIZING CASH BALANCE FOR 44 MILLION TO 90.8 MILLION PER YEAR, RESPECTIVELY.
I DON'T THINK THERE'S ANYTHING ON THIS SLIDE OTHER THAN LET ME CALL OUT THE RELIABILITY ORGANIZATION ASSESSMENT.
UM, UH, WE MENTIONED, UH, THAT, UH, THAT IS A PASS THROUGH.
SO THAT'S BOTH FROM THE SOURCES AND THE USES.
IT'S AN OFFSET DIRECT, IT'S A MANDATORY FEE OR CUT, UH, SETTLES, UH, THE MARKET FOR THAT FEE AND THEN PAYS THAT, UM, CHANGE IN MANAGEMENT RECOMMENDED REVENUE.
OH, WELL, THIS IS MANAGEMENT REV RECOMMENDED REVENUE TRENDS.
WHEN WE LOOK AT THIS OVER TIME, YOU'LL SEE IN 2025, UH, INTERCONNECTION INTERCONNECTION MOVE TO BE OUR TOP FEE OVER WEATHERIZATION.
AND THAT TREND CONTINUES INTO THE OUT YEARS.
SO WE'RE ANTICIPATING SIGNIFICANT INCREASED INTERCONNECTION REQUESTS YEAR OVER YEAR OUT THROUGH 2031.
AND THEN A FEW ADDITIONAL FEES.
ANY QUESTIONS ON OUR NON-SYSTEM ADMINISTRATION FEE REVENUE? WHEN WILL BE, WHEN WILL WE BE ADJUSTING THESE FEES? ARE THEY ADJUSTED WHEN THE SYSTEM ADMINISTRATION FEE ADJUSTED? NO, THE FEE RATE SCHEDULE IS SEPARATE FROM THE SYSTEM ADMINISTRATION FEE SCHEDULE.
SO WE'LL, WE'LL HAVE THE STANDARD APPROVAL FOR THE BUDGET AND THE SYSTEM ADMINISTRATION FEE RATE WILL BE APPROVED BY THE PUC UPDATES TO THE, UH, ERCOT USER FEES IS A SEPARATE SCHEDULE, BUT IT WILL BE APPROVED BY THE PUCI.
I DON'T HAVE A, AN IMMEDIATE TIMELINE ON HOW, HOW QUICKLY WE'LL HAVE THAT SUBMITTED.
I WILL GET YOU AN ANSWER THOUGH BEFORE JUNE BOARD.
THIS IS OUR MANAGEMENT RECOMMENDED BUDGET PROJECTIONS.
IT SHOWS OUR CASH BALANCE SYSTEM ADMINISTRATION FEE, REVENUE, UH, ANTICIPATED INTEREST INCOME, AND THAT'S PAYABLE BALANCE AT THE BOTTOM, UH, DECLINING TOWARDS ZERO DEPARTMENT NET EXPENDITURES AND, UM, DNE AND DEBT SERVICE COMBINED,
[01:45:01]
AS WELL AS, UH, THE, THE TWO COMBINED WITH PROJECT EXPENDITURES FOR THE GRADE LINE AT THE TOP.RISKS, WHICH WE'VE ALREADY DISCUSSED, ENERGY GROWTH AND INTEREST INCOME RATE, UH, ARE OUR PRIMARY RISKS TO ACHIEVING OUR DESIRED ENDING CASH BALANCE AT THE END OF 2027.
DEPARTMENT NET EXPENDITURE GROWTH IS NOT ANTICIPATED TO EXCEED, AND I, I DON'T ANTICIPATE THAT AS A, A MAJOR RISK DEPARTMENT.
NET EXPENDITURE GROWTH AND INTEREST INCOME RATES ARE ANOTHER, UM, VIEW ON HOW THAT LOOKS.
AND THEN OF COURSE, CR FUNDING BALANCE AND INTEREST INCOME RATES ALL IN THE SENSITIVITY ANALYSIS AHEAD.
RICHARD, BEFORE YOU MOVE ON, SIR, WHEN WE, AS WE GET FROM THE JUNE MEETING, I THINK THERE'S SOME OTHER RISKS THAT NEED TO BE ADDED TO THE, TO THE, UH, DISCUSSION TARIFFS, UH, TRADE DISRUPTIONS, GENERAL ECONOMIC DECLINE.
UM, AND THEN TO THE EXTENT THAT TRADE DISRUPTIONS OR COULD BE SUPPLY CHAIN DISRUPTIONS THAT COULD IMPACT, YOU KNOW, THE DC SIX COST.
THERE'S SO, SURE, THERE'S A LOT TO GET OUR ARMS AROUND HERE THAT, THAT NOBODY KNOWS, AND I'M NOT, AND I'M PRETTY CERTAIN IT'S GONNA BE HARD TO QUANTIFY IT, BUT I WOULD ADD THAT TO YOUR OLD'S PORTFOLIO OF RISK TO CONSIDER, UH, TO THE EXTENT THAT YOU CAN PUT SOME, SOME METRICS AROUND IT THAT WOULD BE HELPFUL.
YEAH, I'LL SEE WHAT KIND OF METRICS WE CAN GET.
RIGHT NOW WHEN WE THINK ABOUT, ESPECIALLY D DC SIX, WE'VE INCLUDED TARIFFS AS ONE OF THE ADJUSTING LINE ITEMS WITHIN THAT BUDGET.
SO WHEN WE'RE THINKING ABOUT THE TOTAL 107 MILLION BUDGET FOR THAT, THAT PROJECT THAT WE'RE LOOKING AT CURRENTLY, I THINK ABOUT 10% OF THAT IS A TARIFFS PLACEHOLDER.
NOW THAT, THAT'S PARTIALLY BECAUSE WE HAVE ABOUT 50% OF THE COSTS IN TOTAL IS WHAT WE'RE THINKING ABOUT FOR HARDWARE, HARDWARE WHEN WE GET INTO SOFTWARE AND SERVICES AND THINGS LIKE THAT.
WE JUST HAVEN'T FINISHED THAT, THAT FULL.
BUT YES, WE ARE, WE ARE CONSIDERING THAT IN LOOKING AT IT, I'LL SEE WHAT WE CAN PRODUCE FOR THE BUDGET MATERIALS TO QUANTIFY SOME OF THAT.
THIS FIRST SENSITIVITY ANALYSIS IS THE ONE THAT I THINK, UM, SHOWS OUR TWO TOP RISKS AS FAR AS CASH FLOWS TWO ERCOT.
SO WE HAVE THE TWO YEAR ENERGY GROWTH, UH, THROUGH 26 AND 27, AS WELL AS THE AVERAGE ANNUAL INTEREST RATES.
UM, SO IN THE EVENT THAT ENERGY GROWTH DID NOT MATERIALIZE AT A RATE SIGNIFICANTLY HIGHER THAN OUR EXPERIENCE IN THE LAST SEVERAL YEARS, SO PUTTING THAT DOWN AT THE 5.5%, AND IF INTEREST RATES WERE TO DROP DUE TO AN ECONOMIC DISLOCATION, WE WOULD SEE ENDING CASH AT NEGATIVE 23.5, WHICH WOULD REPRESENT BORROWINGS AGAINST OUR CRR AUCTION BALANCE.
SO EVEN WITH VERY SEVERE RISKS AND A SIGNIFICANT ECONOMIC DOWNTURN, UM, THAT MIGHT IMPACT ENERGY GROWTH IN TEXAS OR IN THE ERCOT REGION, RATHER THEN, YOU KNOW, WE ARE, WE'RE STILL, WE STILL HAVE ADEQUATE CAPABILITY TO BORROW AGAINST THOSE CRR AUCTION FUNDS AND STILL MEET THE NEEDS FOR THE NEXT TWO YEARS.
ANY QUESTIONS ON THIS SLIDE? NO.
AND THEN THIS IS DEPARTMENT NET EXPENDITURES, UH, VERSUS ENERGY GROWTH.
ONCE AGAIN, IF WE SEE LOWER ENERGY GROWTH, UH, THAN EXPECTED VERSUS DEPARTMENT NET EXPENDITURES, UH, WE WOULD SEE A LOWER CASH BALANCE IF DEPARTMENT NET EXPENDITURE GROWTH RATE EXCEEDED.
UH, I DON'T ANTICIPATE THAT, BUT IT'S, IT'S CERTAINLY POSSIBLE IF WE HAD UNEXPECTED REQUIREMENTS THAT CAME IN EITHER OUTTA THE LEGISLATURE OR OUT OF THE PUC WHERE WE NEEDED TO UNDERTAKE SIGNIFICANT ADDITIONAL WORK THAT'S, THAT'S AVAILABLE HERE AS A SENSITIVITY ANALYSIS.
UM, INTEREST RATE DEVIATIONS VERSUS, UH, INTEREST RATE RATHER VERSUS DEPARTMENT NET EXPENDITURE.
ANOTHER SENSITIVITY ANALYSIS TO LOOK AT THAT.
AGAIN, NOT MUCH OF A DANGER ZONE.
AND THE 24 25 BUDGET WE OUTLINED ANYTHING THAT WOULD TAKE US INTO CRR BORROWINGS THAT APPROACHED, UM, A DANGEROUS LEVEL FOR OUR, UM, OPERATING CASH.
AND WE DON'T HAVE THAT CALLED OUT THIS YEAR BECAUSE UNDER THE CURRENT, THE CURRENT, UH, EXPECTATION IS WE WON'T HIT, WE WON'T HIT THAT AREA.
AND THEN CR FUNDING BALANCE VERSUS INTEREST RATES.
SOME RISKS THAT WE HAVE, POTENTIAL RISK LOWER THAN PROTECTED ENERGY GROWTH, INTEREST INCOME RATES, INFLATION, UH, AND WE'LL ADD THOSE, THOSE TWO ITEMS THAT WE DISCUSSED.
TWO OR THREE ITEMS WE DISCUSSED HERE TO THIS LIST OF POTENTIAL RISKS
[01:50:01]
AND THEN THE MITIGATION RESPONSES.UM, JULIE, TO YOUR QUESTION EARLIER, THIS IS HOW WE WOULD MITIGATE, WE, WE'D EITHER USE ADDITIONAL CRR FUNDS, WE COULD REDUCE DEPARTMENT NET EXPENDITURES, REDUCE PROJECT EXPENDITURES, AND OUR LAST MITIGATION THEN WOULD BE INCREASING SYSTEM ADMINISTRATION FEE RATE.
UH, INCREASING THE SYSTEM ADMINISTRATION FEE RATE WOULD FOLLOW THE SAME TIMELINE WE DISCUSSED EARLIER IN THIS MEETING.
SO IT WOULD BE THE FULL, THE FULL TIMELINE.
UM, IT WOULDN'T REQUIRE ALL THE STEPS THAT WE NORMALLY DO, BUT WITH THE PUC AND THE BOARD, IT WOULD REQUIRE THE F AND A TO RECOMMEND A NEW BUDGET TO BOARD THE BOARD TO APPROVE AND THEN SEND THAT TO THE PUC IF WE NEEDED TO HAVE AN INTERIM INCREASE IN THE RATE.
THAT TAKES ME TO THE END OF THE FORMAL PRESENTATION.
WE HAVE THE DEPARTMENT NET EXPENDITURES BY SPEND TYPE AND PROJECT EXPENDITURES BY OFFICE, BY OFFICE AND SPEND TYPE AND A NUMBER OF OTHER ITEMS. SO THANKS, RICHARD.
UH, LET ME START WITH THE FIRST QUESTION.
UM, THE BUDGET FOR 26 SHOWS A 13%, 13% INCREASE IN EXPENDITURES OVER 2025 AND A 14%, UH, GROWTH IN HEAD COUNT.
SO I, LET'S SAY THAT THERE'S A TWEET OUT THERE THAT SAYS, HEY, ERCOT IS, UH, GROWING ITS BUDGET BY 13%.
ITS HEAD COUNT BY 14% OVER ONE YEAR.
WHAT'S THE 280 CHARACTER RESPONSE TO THAT 80? WHAT ARE THE RATE PAYERS IN TEXAS GETTING FOR THAT? SURE.
THE RATE PAYERS ARE GETTING, UM, A MORE RELIABLE GRID.
THEY'RE GETTING INTERCONNECTION OF NEW RESOURCES INTO THE GRID FASTER, UH, THAN ANYWHERE ELSE IN THE COUNTRY.
THEY'RE GETTING, THEY'RE GETTING RELIABILITY, UH, FROM, FROM ALL THESE POSITIONS THAT WE'RE ADDING.
SO WE'RE GETTING ADDITIONAL TECHNOLOGY.
WE'RE INVEST, HMM, I'M ALREADY, I THINK I'M ALREADY OVER MY 280 LIMIT BILL.
WE'RE GETTING ADDITIONAL TECH INFRASTRUCTURE TO SUPPORT THE GRID.
WE'RE WORKING THROUGH THE ADDITIONAL PEOPLE REQUIREMENTS FOR THE REGULATIONS THAT HAVE COME OUT BOTH TO IMPROVE THE RELIABILITY AND SAFETY OF, UM, THE RELIABILITY OF THE GRID AND THE RESILIENCY OF THE GRID.
WE'RE GETTING INCREASED PLANNING TO HELP WITH REGIONAL CONGESTION.
WE'RE MAXIMIZING THE ABILITY FOR ERCOT TO ACT AND MEET THE NEEDS OF THE STATE OF TEXAS.
I JUST, I JUST, I THROW THAT OUT AS MORE OF A RHETORICAL QUESTION TO BE PREPARED TO ANSWER AS WE GET INTO JUNE.
AND IT ALSO, AS THIS BUDGET GOES TO THE PUC, I'M SURE THE PUC IS GONNA ASK IT.
UM, THERE'LL BE OTHER PEOPLE TO BE ASKING THE PUC ABOUT, UH, THAT QUESTION AS WELL.
SO I THINK IT'S SOMETHING THAT WE NEED TO, UH, MAKE SURE WE'VE GOT A REALLY GOOD SUCCINCT ANSWER.
I MEAN, WHAT I WAS SORT OF ADDING UP IS THAT ABOUT HALF THE INCREASING EXPENDITURES DUE TO, YOU KNOW, REGULATORY AND STATUTORY REQUIREMENTS, UH, THAT ARE BEING PUSHED DOWN TO RIGHT ISOS.
UH, BUT THE OTHER HALF SINCE LOOKS LIKE IT'S A LITTLE BIT MORE DISCRETIONARY AND I, IT'S ALL, IT ALL LOOKS EXPLAINABLE THE WAY THE BUDGET'S LAID OUT, BUT I THINK WE NEED TO MAKE SURE THAT WE, THAT WE CAN EXPLAIN IT SUCCINCTLY TO THE RATE PAYERS OF TEXAS AS WE MOVE FORWARD.
ANY OTHER QUESTIONS FOR RICHARD OR ANYBODY ELSE ON THE TEAM THAT PRESENTED THIS? SEE, YEAH, I'VE GOT A REQUEST, I GUESS.
UM, SOME OF THESE ARE CONTRACT CONVERSIONS, UH, CONTRACTOR CONVERSIONS.
SO PERHAPS IT'D BE GOOD TO SEE A TOTAL, UH, PERSPECTIVE OF WHAT YOUR TOTAL WORKFORCE EMPLOYEES AND CONTRACTORS.
SO WE, SO WE COULD SEE IS THE TOTAL WORKFORCE EXPANDING OR ARE, IS IT JUST CONVERSION? SO IF YOU COULD PULL THAT TOGETHER, IT'D BE HELPFUL.
YEAH, I'LL GET A SLIDE TOGETHER FOR THAT.
SO, UM, ALONG THE SAME LINES YOU WERE DRILLING DOWN ON BILL, I WAS HAVING A SIDE CONVERSATION WITH RICHARD ABOUT SEPARATING OUT WHAT I CALL THE, YOU KNOW, THE ONE IN 10 YEAR OR WHAT SPECIAL PROJECTS THAT ARE INFLATING THIS BUDGET VERSUS THE CORE BUSINESS, APPLES TO APPLES YEAR OVER YEAR.
WHAT IS THAT GROWTH? AND HOPEFULLY IT'D BE LESS THAN 10% YEAR OVER YEAR.
SO RICHARD'S LOOKED INTO THAT, AND I THINK THAT'S ANOTHER WAY TO EXPLAIN THE GROWTH OF THE CORE BUSINESS IS SCALING WITH DEMAND ON THE GRID VERSUS THE ONE TIME PROJECT YOU RAISE.
'CAUSE I REMEMBER THE FIRST TIME I WENT THROUGH THIS AS A, AS A NEW BOARD MEMBER, WE WERE GOING THROUGH DC FIVE AND, AND NOW WE'RE GOING KIND DEJAVU ALL OVER AGAIN.
AND THOSE ARE LUMPY EXPENDITURE PATTERNS.
IT'S VERY HARD TO COMPARE THAT.
SO TO THE EXTENT THAT YOU CAN FIND A WAY TO SHOW SORT OF BASE BUDGET WITHOUT THE SPECIAL PROJECTS THAT THE LUMPY
[01:55:01]
PROJECTS, THAT MIGHT BE HELPFUL FOR THE JUNE PRESENTATION.I THINK IT COULD BE DONE IN ONE OR TWO SLIDES.
AND THAT, THAT WAS SOMETHING THAT, UM, UH, I WAS TALKING ABOUT EARLIER WITH THE PORTFOLIO TEAM AND TROY WAS THE AMOUNT OF REVISION REQUESTS THAT WE HAVE AHEAD OF US.
YOU KNOW, THAT'S AN EIGHT TO 10 MILLION LUMP THAT'S HAPPENING DURING THE 26 TO 27 CYCLE.
THEY'RE PRIORITIZING THAT OVER THE NEXT SEVERAL MONTHS ON HOW THAT'S GONNA BE DEPLOYED.
BUT IT'S SIGNIFICANT, A SIGNIFICANT EFFORT THAT'S GONNA TAKE PLACE WITH HOURS AND DOLLARS, UM, BASED ON ALL THE APPROVED REVISION REQUESTS WE HAVE RIGHT NOW.
THANKS FOR THE ANALYSIS, RICHARD.
AND YOU'VE BEEN VERY HELPFUL IN WALKING SOME OF US THROUGH THIS ON THE SIDE.
UH, ANYTIME YOU COME UP WITH A BUDGET, IT'S DIFFICULT, BUT TODAY, THIS VERY DAY I CAN, THE CHALLENGE IS FIGURING OUT ALL THESE ISSUES ARE VERY SIGNIFICANT, PROBABLY MORE SO THAN I'VE EVER SEEN SETTING A BUDGET.
SO WE ARE SET TO APPROVE IN JUNE, UH, ON THE TIMELINE.
I WOULDN'T BE A BIT SURPRISED IF A LOT OF THESE NUMBERS CHANGE DEPENDING ON WHAT HAPPENS THE, THE NEXT MONTH OR SO, UH, ON OUR GROWTH, EXPECT ALL OF THE EXPECTATIONS, THE, THE FEE DOESN'T GET APPROVED UNTIL DECEMBER BY THE PUC.
IS THERE THOSE DEADLINES IN HERE? 'CAUSE WE WANNA GET YOU THE BEST BUDGET POSSIBLE, OBVIOUSLY.
THE, THE, THE DEADLINES IN HERE AND THE TIMELINE ARE THEY MANDATORY IS OUR ONLY OPTION TO, IF THINGS CHANGE DRAMATICALLY TO AMEND, I KNOW WE DID THAT THE LAST BUDGET CYCLE.
I DON'T THINK THEY'RE MANDATORY.
THE, THE TIMELINE'S SET UP THAT WAY TO ACCOMMODATE THE FACT THAT WE HAVE TO HAVE A PUBLIC HEARING AND WE HAVE TO APPROVE THIS IN AN OPEN MEETING.
BUT AS ALWAYS, IF SOMETHING DRASTICALLY CHANGES, WE CAN ALWAYS COME BACK AND DO AN AMENDED BUDGET AND SYSTEM ADMINISTRATION FEE.
YEAH, AND, AND YOU BRING UP AN IMPORTANT POINT.
WHEN WE WENT THROUGH THIS IN 23, RIGHT BEFORE THE PUC MADE THEIR FINAL HEARING, WE SUGGESTED MAKING AN AMENDMENT TO LOWER THE FEE BY A COUPLE OF CENTS, I BELIEVE, BASED ON INTEREST RATES AND SO FORTH.
SO IT IS, IT IS A PRETTY FIRM SCHEDULE, BUT IT IS SOMETHING THAT, THAT HAS A LITTLE BIT OF FLEXIBILITY IN IT.
I THINK ONE OF THE KEY ISSUES IS THE PROVIDERS HAVE TO INSERT THIS RATE INTO THEIR BILLING SYSTEMS. AND SO THE PUC NEEDS TO DO IT ENOUGH IN ADVANCE BEFORE JANUARY THE FIRST SO THAT THEY CAN, THE PROVIDERS CAN MAKE ALL OF THOSE CHANGES.
AND THAT, THAT ONE PIECE IS, IS FIRM.
WE DO HAVE THE 45 DAY REQUIREMENT, SO NOVEMBER 15TH IS THE, OR SO IS THE DATE.
I'D HAVE TO CHECK THE CALENDAR SEEING EXACTLY WHEN THAT DAY, THAT DAY FALLS.
SO BENJAMIN, ALEX, ANY QUESTIONS FROM GOING? OKAY, PABLO, IS THERE ANYTHING ELSE WE SHOULD HAVE ASKED THAT WE DIDN'T? NO, I HAVE MORE FUN ON THIS BETWEEN NOW AND JUNE ANYWAY.
YEAH, AS YOU AND I SPOKE ABOUT EARLIER, I THINK IT'S, UM, IMPORTANT TO NOTE THAT THERE WAS A LOT OF LESSONS LEARNED IN THE LAST BUDGET CYCLE AS WE WENT THROUGH THIS PROCESS AND WHAT WE TRY TO BRING INTO TODAY'S DISCUSSION.
AND ALTHOUGH IT WAS A LONG KIND OF IN, AND THERE'S A LOT OF IN DEPTH MATERIAL HERE, THAT WAS A LESSON LEARNED FROM THE LAST SESSION WHERE THERE WAS A LOT OF INTEREST IN UNDERSTANDING HOW THE VARIOUS PIECES OF THE BUDGET WERE BROKEN DOWN BY DRIVERS OF THE, OF THE, UM, OF THE SYSTEM, PROJECT ALIGNMENT, THE STRATEGIC PLAN.
AND SO ALL THE DIFFERENT CUTS THAT WERE PRESENTED TODAY WERE A REFLECTION OF THAT FEEDBACK FROM YOU IN THE LAST CYCLE.
SO WHILE IT, IT, IT'S, UM, MAYBE A LITTLE BIT MORE DATA AND CONTENT UP FRONT, HOPEFULLY OVER TIME AS WE MOVE TOWARDS THE JUNE CYCLE, WE'LL BE ABLE TO GET ALL OF THE KIND OF FINAL QUESTIONS ASKED AND THE REFINEMENTS IN A MORE EXP EXPEDITIOUS FASHION THAN WE WERE ABLE TO LAST TIME.
AND IF THERE IS ANY, YOU KNOW, FINAL CHANGES THAT HAPPEN AS A RESULT OF INTEREST RATE ENVIRONMENT OR SOMETHING IN TERMS OF ECONOMIC GROWTH EXPECTATIONS, WE'LL BE BETTER POSITIONED AT THAT POINT TO BE REFLEX RESPONSIVE TO THAT.
UM, SO, BUT OVERALL, I THINK THE, THE, THE DISCUSSION WAS GOOD.
I, I, I APPRECIATE THE EFFORTS OF THE TEAM TO REALLY TRY TO BRING UPFRONT, YOU KNOW, THOSE ELEMENTS THAT WERE, UM, YOU KNOW, DEFERRED FROM PRIOR BUDGETS SAVED DURING THE LAST CYCLE, UM, ADDED, YOU KNOW, THIS CYCLE AND WHY, AND THE RISK, UH, AND THAT IT WAS ADDRESSING.
AND I THINK, YOU KNOW, IT WENT, WE WENT THROUGH A LOT OF CYCLES AS A LEADERSHIP TEAM, UM, AS RICHARD POINTED OUT EARLY, CHALLENGING EACH OTHER AND MAKING SURE WE UNDERSTOOD WHAT EACH, UH, PART OF THE ORGANIZATION WAS DOING, SO THAT TOGETHER WE WOULD HAVE A COHESIVE BUDGET, UH, TO BE ABLE TO SERVE ON THE EXPECTATIONS OF ALL, ALL TEXANS.
SO THANK YOU FOR TAKING THE TIME TO GO THROUGH THIS, THIS MORE EXHAUSTIVE MATERIAL AT THIS STAGE IN THE PROCESS.
[02:00:01]
I THINK IT SETS US UP FOR A, A BETTER, BETTER UNDERSTOOD BUDGET WHEN WE GET TO THE FINAL VOTING STAGE.I WOULD LIKE TO RETRACT MY COMMENT ABOUT THE WORKFORCE.
I, JULIE DID POINT OUT TO ME THAT IT'S IN THERE.
UH, I JUST MISSED IT, SO APOLOGIZE.
I'M GONNA ASK OUR COMMISSIONERS IF THEY HAVE ANY QUESTIONS.
I MEAN, THEY'RE KEENLY INTERESTED IN THIS.
COURTNEY, KATHLEEN, MR. CHAIR.
I WILL SAY LAST TIME WE DID ASK, AND IT'S JUST A REMINDER THAT MAKE SURE THAT THE STAFFING YOU NEED IS THOUGHT ABOUT WITH WHATEVER COMING FROM SESSIONS SO THAT YOU DON'T COME BACK AND SAY, YOU KNOW, WE'RE HAVING A TIME CRUNCH BECAUSE WE'VE GOTTEN THAT HIT HARD OF, WE HAVE TO GET THESE THINGS DONE AND IMPLEMENTED.
SO MAKE SURE THAT'S CLEAR AND IN THERE.
AND I'LL, I'LL DIS FULL DISCLOSURE, WE HAVE SIX POSITIONS RIGHT NOW IN THE BUDGET THAT ARE UNACCOUNTED FOR.
SO THEY'RE, THEY ARE OPEN, THEY'RE OPEN ITEMS READY FOR LEGISLATIVE RESPONSE, DEPENDING ON WHAT COMES OUTTA THE SESSION.
AND THEN WHEN WE GET CLOSER TO THE END OF THE SESSION, HOPEFULLY WE CAN GET A BETTER ESTIMATE ON IF THAT'S ENOUGH OR IF WE'RE GONNA NEED MORE.
I GUESS MY ONLY COMMENT WOULD BE THAT, YOU KNOW, THIS IS A TREMENDOUS TIME OF CHANGE, AND I KNOW WHEN WE GO IN AND WE PREPARE BUDGETS IN THE PAST, WE, WE RELY HEAVILY ON HOW OUR PERFORMANCE HAS BEEN IN THE PAST, BUT AT, AT LEAST AT THIS PARTICULAR POINT IN TIME, WE HAVE SO MANY THINGS FACING US THAT, UM, I THINK THE EXPECTATION OF THE PUBLIC, AT LEAST IN MY MIND, IS THAT WE HAVE THE RESOURCES THAT WE NEED.
SO, UM, IF, IF THIS IS THE BUDGET THAT ERCOT PUTS FORWARD, THEN I THINK THE EXPECTATION IS THAT YOU'RE ASKING FOR WHAT YOU ACTUALLY, WHAT YOU DO NEED TO, UM, IN SOME WAYS NOT JUST MEET WHAT WE SEE COMING AT US, BUT ALSO IN SOME REGARD TO BE PREPARED FOR WHAT MAYBE WE DON'T NECESSARILY SEE THAT'S COMING.
SO I WOULD JUST ENCOURAGE US TO MAKE SURE THAT WE ARE ASKING, UM, FOR WHAT WE NEED TO, TO MEET THE PUBLIC'S EXPECTATION.
IF THERE ARE NO OTHER QUESTIONS, WE'RE GONNA MOVE TO THE NEXT AGENDA ITEM, BUT, UH, RICHARD AND ALL THE TEAM, ALL THE LEADERSHIP TEAM AND EVERYBODY THAT HELPED PUT THIS TOGETHER, UH, A YOU DID A GOOD JOB.
BII THINK YOU, UH, TRIED TO PROACTIVELY, UH, THINK ABOUT WHAT THE RATE PAYERS WERE GONNA ASK, WHAT THE BOARD WAS GOING TO ASK AND WHAT THE, WHAT THE, UH, GENERAL PUBLIC WILL ASK.
UH, WE ARE, IT'S SOME UNCERTAIN TIME, SO WE HAD A FEW MORE QUESTIONS FOR YOU TO TRY TO ANSWER, UH, WITH AS WE GET INTO JUNE.
UM, AND WE LOOK FORWARD TO THE, WELL, WE DON'T LOOK FORWARD TO DISCUSSION, BUT I KNOW WE'RE GONNA HAVE THE DISCUSSION IN JUNE.
[7. Future Agenda Items]
SO WITH THAT, UH, WE'RE GONNA MOVE UP TO AGENDA ITEM SEVEN, FUTURE AGENDA ITEMS. AND RICHARD IS GOING TO, UH, CONTROL THIS DISCUSSION.FUTURE AGENDA ITEMS, UH, FUTURE AGENDA ITEMS. WE DON'T HAVE ANYTHING, UH, SIGNIFICANT UPCOMING.
UM, WE HAVE THE INSURANCE RENEWALS THAT WE'LL BE EXPECTING IN THE JUNE BOARD MEETING.
I GUESS THAT IS SOMETHING INTERESTING.
UH, OF COURSE WE'LL HAVE THE FOLLOW UP TO THIS MEETING WITH REVIEWING THE PROPOSED BUDGET.
UH, OTHERWISE IT IS STANDARD COMMITTEE BRIEFS AND RECEIVING THE INDEPENDENCE REPORT FROM THE 401K AUDITORS AND THE RESULTS OF THAT AUDIT DURING THE NEXT, THE NEXT COMMITTEE MEETING.
ANY QUESTIONS ON FUTURE GEN ITEMS? OKAY, THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION IS A GEN ITEM EIGHT OTHER BUSINESS.
DOES ANY DIRECTOR OR, UH, ANYONE ELSE WANT TO RAISE ANOTHER ISSUE FOR THE BOARD TO DISCUSS BEFORE WE GO INTO EXECUTIVE SESSION?
[Convene Executive Session]
OKAY.AT THIS TIME, THE, UH, COMMITTEE WILL RECESS, GENERAL SESSION AND CONVENE IN AN EXECUTIVE SESSION.
UH, THERE ARE SIX VOTING ITEMS ANTICIPATED FROM THE EXECUTIVE SESSION.
UM, AND SO GENERAL SESSION WILL RECONVENE AFTER THE CONCLUSION OF THE EXECUTIVE SESSION.
GENERAL SESSION IS NOW RECESSED AND A WEBCAST WILL BE CONCLUDED.
CHAIR GLEASON, THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL STAND IN RECESS.
[Reconvene General Session ]
ALL RIGHT.UH, BILL FLORES, UH, BOARD CHAIR OF THE GENERAL SESSION OF THIS MEETING IS NOW RECONVENED.
[9. Vote on Matters from Executive Session]
UH, WE HAVE TWO VOTING ITEMS. THE FIRST ONE IS AGENDA ITEM IS, UH, WE'RE TAKING BACK UP AGENDA ITEM 4.2, THE REPORT ON DECEMBER 31ST, 2024, FINANCIAL AUDIT AND ANNUAL SURFACER CERTIFICATE AND A VOTE ON AGENDA ITEM, UH, 9.1 TO 2024 FINANCIAL STATEMENT AUDIT REPORTS.WE'LL HAVE THREE VOTING ITEMS FOR 9.11 THROUGH 9.13.
ACCORDINGLY, I'LL ENTERTAIN A MOTION THAT THE COMMITTEE
[02:05:01]
RECOMMEND THAT THE BOARD ACCEPT THE AUDITED FINANCIALS AND FINANCIAL STATEMENT AUDIT REPORTS FOR ERCOT, UH, INC FOR THE TEXAS ELECTRIC MARKET STABILIZATION FUNDING MLLC AND NUMBER THREE FOR THE TEXAS MARKET STABILIZATION FUNDING NLLC AS PRESENTED.UH, DO I HAVE A MOTION? JULIE? THANK YOU.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
UH, THE COMMITTEE WILL RECOMMEND THAT THE BOARD APPROVE THE FINANCE, ACCEPT THE FINANCIAL STATEMENTS, UH, DURING ITS, UM, ITS MEETING.
UH, NEXT IS AGENDA ITEM 9.2, THE SELECTION OF INDEPENDENT FINANCIAL AUDITOR.
WE HAVE THREE VOTING ITEMS FOR AGENDA ITEMS, 9.2 0.1 THROUGH 9.2 0.3.
ACCORDINGLY, I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD SELECT THE AUDITOR DISCUSS DURING EXECUTIVE SESSION UNDER AGENDA ITEM ES 2.4 AS THE INDEPENDENT FINANCIAL AUDITOR TO PERFORM THE FOLLOWING FOR THE YEAR ENDED DECEMBER 31ST, 2025, THE FINANCIAL STATEMENTS AUDIT, UH, FINANCIAL STATEMENTS, AUDIT SURFACE CERTIFICATE REPORT, AND FORM NINE 90 REVIEW FOR ERON INC.
SECOND, THE FINANCIAL STATEMENTS AUDIT AND CONSOLIDATION PROCEDURES FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING, MLLC.
AND NUMBER THREE, THE FINANCIAL STATEMENTS AUDIT AND CONSOLIDATE CONSOLIDATION PROCEDURES FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING AND LLC.
UH, DO I HAVE A MOTION TO APPROVE THAT? SEE, THANK YOU.
ALL IN FAVOR? ANY OPPOSED, ANY ABSTENTIONS? OKAY.
THE, UM, AUDITORS, UH, SELECTION HAS BEEN APPROVED.
THE MEETING OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED, AND THE WEBCAST WILL BE CONCLUDED.